GST Implication on Payment under ICC Arbitration Award for Breach of Non-Solicitation Clause

[Abhijeet Mane]

A is required to pay C (Located outside India) under an ICC arbitration award for breach of a non-solicitation/non-circumvention clause in their Term Sheet. The breach occurred because A directly engaged with B (Customer of C) and secured brand rights for India during the exclusivity period, triggering liquidated damages of INR 1 Lacs to be paid by A to C.

Does GST under Reverse Charge apply on this payment to C? 

AI Summary

GST on arbitration award payments depends on characterisation as liquidated damages or consideration for supply.
Whether GST reverse charge applies to payment to a non resident under an arbitral award depends on characterisation: payments treated as liquidated damages are compensatory, not consideration for supply, and thus outside GST scope; if characterised otherwise, reverse charge and input tax credit consequences may arise.