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of <h1>Sikkim Govt Circular: GST on Liquidated Damages, Penalties, and Compensation Explained under Sikkim GST Act, 2017.</h1> The circular from the Government of Sikkim's Commercial Taxes Division clarifies the applicability of GST on payments related to liquidated damages, compensation, and penalties arising from contract breaches. It examines whether such payments qualify as a 'supply' under the Sikkim Goods and Services Tax Act, 2017. The circular outlines that payments like liquidated damages are generally not taxable as they compensate for losses rather than serve as consideration for a service. However, certain payments, such as cancellation fees or late payment surcharges, are considered taxable as they are ancillary to the principal supply of services. The document provides guidelines for determining taxability in various scenarios.
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