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of <h1>GST Not Applicable on Liquidated Damages, Penalties, or Compensation Unless It Constitutes a Supply Under Delhi GST Act 2017.</h1> The circular addresses the applicability of GST on payments like liquidated damages, compensation, and penalties arising from contract breaches or legal provisions. It clarifies that such payments are not taxable unless they constitute a supply of service as defined in the Delhi Goods and Services Tax Act, 2017. The document explains that liquidated damages, penalties, or compensation are not considered a supply if they are merely compensatory and not for tolerating an act or situation. Examples include damages for contract breaches, penalties for legal violations, and compensation for cancelled coal blocks, which are not taxable as they do not constitute consideration for a supply.
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