Forfeiture on breach can be taxable supply of service under GST when it reflects tolerance of non-performance.

Amounts forfeited on breach of an agreement to sell land are taxable under GST where the forfeiture is not part of the land sale consideration but represents consideration for agreeing to tolerate the purchaser's non-performance. That arrangement falls within the GST concept of a supply of service, distinct from the non-taxable sale of land under Schedule III. The ruling also holds that, in such a transaction, the applicant is the service provider and the prospective purchaser is the service receiver. The advance ruling therefore answers both issues in favour of Revenue.

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Issues: (i) Whether the amount forfeited on breach of an agreement to sell land is liable to GST as a supply of service. (ii) Whether the applicant is the service provider and the prospective purchaser is the service receiver.

Issue (i): Whether the amount forfeited on breach of an agreement to sell land is liable to GST as a supply of service.

Analysis: The forfeited amount was not received as consideration for sale of land. It was received because the prospective purchaser failed to fulfil the contractual obligation to complete the transaction. The arrangement fell within the scope of agreeing to the obligation to refrain from an act, to tolerate an act or a situation, or to do an act. Such activity is treated as a supply of service under the GST framework and is distinct from the non-taxable sale of land covered by Schedule III.

Conclusion: The forfeited amount is liable to GST and the issue is decided against the applicant.

Issue (ii): Whether the applicant is the service provider and the prospective purchaser is the service receiver.

Analysis: The contractual arrangement showed that the applicant accepted the contingency of forfeiture in return for the purchaser's failure to complete the purchase. The service element arose from the applicant's toleration of the purchaser's breach and the associated contractual consequence.

Conclusion: The applicant is the service provider and the prospective purchaser is the service receiver.

Final Conclusion: Forfeiture of advance in these circumstances constitutes taxable supply of service under the GST regime and the advance ruling answers both questions in the Revenue's favour.

Ratio Decidendi: Amounts forfeited on breach of a contractual obligation are taxable when the forfeiture is consideration for agreeing to tolerate the other party's non-performance, as that arrangement is a supply of service under the GST law.

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