Consideration for contractual obligation: GST applies when payment is for agreeing to do, refrain from, or tolerate an act. GST attaches only where payment constitutes consideration for a supply - an express or implied agreement by which one party agrees to do, refrain from, or tolerate an act in return for payment. Payments that are merely compensation for breach, statutory or deterrent penalties, cheque dishonour fines, and forfeiture of earnest money or bond recoveries do not constitute consideration for tolerating or refraining and are not taxable. By contrast, charges that are consideration for ancillary facilities bundled with a principal taxable supply (e.g., cancellation fees, late payment charges, early termination or prepayment penalties) are taxable and assessed as part of the principal supply; exempt principal supplies render such ancillary charges non taxable.
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.
Consideration for contractual obligation: GST applies when payment is for agreeing to do, refrain from, or tolerate an act.
GST attaches only where payment constitutes consideration for a supply - an express or implied agreement by which one party agrees to do, refrain from, or tolerate an act in return for payment. Payments that are merely compensation for breach, statutory or deterrent penalties, cheque dishonour fines, and forfeiture of earnest money or bond recoveries do not constitute consideration for tolerating or refraining and are not taxable. By contrast, charges that are consideration for ancillary facilities bundled with a principal taxable supply (e.g., cancellation fees, late payment charges, early termination or prepayment penalties) are taxable and assessed as part of the principal supply; exempt principal supplies render such ancillary charges non taxable.
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