AAR held that liquidated damages paid by the applicant to the...

AAR held that liquidated damages paid by the applicant to the concessionaire under the concession agreement do not constitute consideration for a taxable supply and are not subject to GST; accordingly, the concessionaire is not entitled to avail input tax credit in respect of such receipts. The Authority applied Circular No.178/10/2022-GST reasoning that where damages merely compensate for loss without any express or implied agreement by the recipient to tolerate or perform acts for the payer, such payments are a monetary compensation flow and not taxable. AAR further noted CBIC clarification on penal charges as analogous, observing the charges enforce contractual discipline for breaches. No other questions required adjudication.