TaxTMI 
TaxTMI 
One of our party received Rs 250000 amount as Advance. The goods was not lifted and the rate of goods suddenly went down and the amount was forfeited and shown as Income in Profit and loss.
Whether GST is applicable on this transaction.
GST implication on forfeiture of advance received
18 Mar 2026 
4 Replies 
1676 Views Asked by
Forfeited advance not treated as supply; GST does not apply where forfeiture amounts to liquidated damages.
Forfeited advances for non-lifting of goods, where no separate agreement to tolerate the buyer's failure exists, operate as liquidated damages and not as consideration for a supply; administrative guidance and rulings treat such forfeiture as consequence of breach and therefore not subject to GST absent an express contractual arrangement creating a tolerance service. (AI Summary)
Forfeited advances for non-lifting of goods, where no separate agreement to tolerate the buyer's failure exists, operate as liquidated damages and not as consideration for a supply; administrative guidance and rulings treat such forfeiture as consequence of breach and therefore not subject to GST absent an express contractual arrangement creating a tolerance service. (AI Summary)