GST on amount recovered from contractor

[Kaustubh Karandikar]

A Worker was on pay roll of the contractor. On his death, compensation to his family was initially paid by XYZ. However, as advised by the Insurance Company, it was to be paid by the contractor and therefore, the amount paid to the employee was recovered from the contractor by XYZ. Is XYZ required to pay GST on the amount recovered from the contractor?

[Rajagopalan Ranganathan]

Sir,

In my opinion, the amount recovered by XYZ is a wrongly paid amount which is not liable to be paid by XYZ Hence it will not amount to any payment made towards (i) Agreeing to do an act, (ii) Agreeing to refrain from doing an act or (iii) Agreeing to tolerate an act. hence it is not liable to GST.

[KASTURI SETHI]

In this scenario, compensation is not income. No. consideration and hence no supply. Out of the definition of supply. Also agree with Sh.Ranganathan, Sir.

[Kaustubh Karandikar]

thanks kasturi and rajgopalan ji for your kind advice

[Shilpi Jain]

We should stop assuming that any receipt would be liable to GST. Unless there is a supply, no receipt can be taxed

[CA Hemanth Kumar]

Agreed with the experts view.

GST will not be applicable on all amounts received. It will be applicable only on amounts received as a consideration for the supplies made.

AI Summary

GST on reimbursements: recovered compensation from contractor is not taxable as no consideration and no supply.
The amount recovered by the principal from the contractor for compensation originally paid to a worker is a reimbursement of a wrongly borne payment and does not constitute consideration for a supply; accordingly, it falls outside the GST definition of taxable supply and is not subject to GST.