Agreement to tolerate or refrain from an act determines GST liability; mere penalties or compensatory payments are not taxable. Taxability requires that payments be consideration for a supply by way of an agreement to do, refrain from, or tolerate an act; mere compensatory or punitive payments arising from breach, statutory cancellation, or penalties without an agreement to tolerate or refrain are not consideration and are not taxable, whereas payments that constitute consideration for ancillary facilitation services (such as cancellation fees or late payment acceptance) are taxable and assessed with the principal supply unless the principal supply is exempt.
Cases where this provision is explicitly mentioned in the judgment/order text; may not be exhaustive. To view the complete list of cases mentioning this section, Click here.
Provisions expressly mentioned in the judgment/order text.
Agreement to tolerate or refrain from an act determines GST liability; mere penalties or compensatory payments are not taxable.
Taxability requires that payments be consideration for a supply by way of an agreement to do, refrain from, or tolerate an act; mere compensatory or punitive payments arising from breach, statutory cancellation, or penalties without an agreement to tolerate or refrain are not consideration and are not taxable, whereas payments that constitute consideration for ancillary facilitation services (such as cancellation fees or late payment acceptance) are taxable and assessed with the principal supply unless the principal supply is exempt.
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