Non monetary consideration

[Anish Sonak]

Hi,

Loss was incurred by one of customers say Y due to delay in supply of machine by X (the supplier). Y intended to claim damages of 30 Cr.

Instead of paying in cash, X supplies two machines on lease free of charge to Y for a period of 2.5 yrs. Would it be said the supply of machines by X is for a consideration. Is there any kind of non monetary consideration Y has provided to X. Whether X should pay GST on notional value of lease rentals. I believe Y would not have any complication in light of circular on liquidated damages.

Regards.

AI Summary

Non-monetary consideration: free supply as settlement may or may not trigger GST on notional lease value.
Whether a free-of-charge lease of machines furnished as settlement for loss constitutes consideration under GST and triggers taxability on notional lease rentals. One view treats such free supply as non-monetary consideration taxable at market value; an alternate view, drawing on CBIC Circular No.178/10/2022 and provisions on scope of supply, treats compensatory transfers made without any obligation by the recipient as not constituting consideration and therefore not taxable.