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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether GST is payable on interest awarded under arbitration and costs awarded under arbitration in respect of a transaction completed in the pre-GST period.
Analysis: The underlying manufacture, clearance, invoicing, and service elements were completed before the GST regime commenced. On those facts, the provisions governing time of supply under sections 12 and 13 of the Central Goods and Services Tax Act, 2017 did not apply to create a fresh GST liability on the principal transaction. The transitional provisions in section 142(10) and section 142(11)(a) and (b) were also held to exclude GST where the underlying goods and services had already suffered or were liable to legacy tax under the earlier regime. The arbitration-related interest was treated as arising from a commercial dispute over a pre-GST transaction rather than from a new taxable supply under GST. The arbitration costs were likewise held not to constitute an independent supply or consideration for a taxable service, especially in the absence of any contractual clause for penalty, damages, or delayed-payment charges.
Conclusion: GST is not payable on the interest awarded under arbitration or on the costs awarded under arbitration.
Ratio Decidendi: Amounts awarded after GST commencement remain outside GST where they are merely consequences of a completed pre-GST transaction and do not represent consideration for an independent taxable supply under the GST regime.
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