2025 (7) TMI 384

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....he applicant; • GSL, held back the amount of Rs. 1.39 crores on account of losses which they claimed to have been incurred due to mistake on the part of the applicant, in respect of some other contract between the said parties; • the applicant had written off the said amount [to be received from M/s. GSL] in his books of account, in the FY 2012-13; • consequently in 2014, the applicant, initiated arbitration proceedings through Arbitration case No. 3/2004. The said proceedings culminated vide award dated 29.9.2017, wherein the arbitrator held that the amount of Rs. 1.39 crore, was payable to the applicant by GSL along with interest. The arbitrator further awarded Rs. 1.75 as arbitration costs to the applicant; • GSL, contested the award before the Hon'ble High Court, which directed them to deposit the principal amount in September 2019 and bank guarantee for the interest component and arbitration cost awarded by the arbitrator; • the applicant received the principal amount in March 2020 and the interest and the arbitration cost in the year 2024; though the interest paid is upto September 2019, the interest beyond ....

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....ration of an act; • that they would like to rely on the ruling of Continental Engineering Corporation Ruling dated 8.10.2011; • that the cost of arbitration of Rs. 1.75 lacs is awarded u/s 31A of the Arbitration Act, 1996; that it does not represent supply of goods/services; • that the contract explicitly does not contain any clause for penalty or compensation for delay in payments. 4. In view of the foregoing, the applicant has raised the following questions seeking a ruling, viz [i] Whether in the facts & circumstances of the case, applicant is liable to pay GST on the "interest awarded under arbitration" & "costs awarded under arbitration" as received by the applicant? [ii] If the answer to question No. 1 is affirmative, kindly clarify whether any supply is involved & what will be the time of determination of such supply involved, if any, and the rate of tax applicable thereon? 5. Personal hearing was granted on 8.4.2025 wherein Shri Shri M.P.S. Sengar, Shri Rajesh Desai, Shri Sudhir Chavan and Shri S.K.K. Krishnan appeared on behalf of the applicant and reiterated the facts as stated in the application. 5.1 In pu....

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....arbitral Tribunal is taxable on reverse charge basis under CGST and SGST Act @9% each and the service tariff code is 998215 Discussion and findings 7. At the outset, we would like to state that the provisions of both the CGST Act and the GGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the GGST Act. 8. We have considered the submissions made by the applicant in their application for advance ruling as well as the submissions made during the course of personal hearing. We have also considered the issue involved, the relevant facts & the applicant's submission/interpretation of law in respect of question on which the advance ruling is sought. 9. Before adverting to the submissions made by the applicant, we would like to reproduce the relevant provisions for ease of reference: CENTRAL GOODS AND SERVICES TAX, 2017 Section 12. Time of Supply of Goods .- (1) The liability to pay tax on goods shall arise at the time of supply, as determined in accordance with the provisions of this secti....

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.... case where a periodical return has to be filed, be the date on which such return is to be filed; or (b) in any other case, be the date on which the tax is paid. (6) The time of supply to the extent it relates to an addition in the value of supply by way of interest, late fee or penalty for delayed payment of any consideration shall be the date on which the supplier receives such addition in value. Section 13. Time of Supply of Services.- (1) The liability to pay tax on services shall arise at the time of supply, as determined in accordance with the provisions of this section. (2) The time of supply of services shall be the earliest of the following dates, namely :- (a) the date of issue of invoice by the supplier, if the invoice is issued within the period prescribed under [****] section 31 or the date of receipt of payment whichever is earlier; or (b) the date of provision of service, if the invoice is not issued within the period prescribed under [****] section 31 or the date of receipt of payment, whichever is earlier; or (c) the date on which the recipient shows the receipt of services in his books of acco....

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....tion (2) or sub-section (3) or sub-section (4), the time of supply shall- (a) in a case where a periodical return has to be filed, be the date on which such return is to be filed; or (b) in any other case, be the date on which the tax is paid. (6) The time of supply to the extent it relates to an addition in the value of supply by way of interest, late fee or penalty for delayed payment of any consideration shall be the date on which the supplier receives such addition in value. Section 142. Miscellaneous transitional provisions.- (10) Save as otherwise provided in this Chapter, the goods or services or both supplied on or after the appointed day in pursuance of a contract entered into prior to the appointed day shall be liable to tax under the provisions of this Act. (11) (a) notwithstanding anything contained in section 12, no tax shall be payable on goods under this Act to the extent the tax was leviable on the said goods under the Value Added Tax Act of the State; (b) notwithstanding anything contained in section 13, no tax shall be payable on services under this Act to the extent the tax was leviable on the said services un....

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....t, 2017, deals with time of supply in respect of service. As is already mentioned, the invoice having been issued before the advent of GST, there is no supply under GST, & likewise, section 13(6) would not apply. 16. The applicant has further stated that no GST is applicable even in terms of section 142(10), 142(11)(a) and (b). On going through the provisions, which is already reproduced supra, we agree with the contention of the  applicant more so since the material portion and service portion of the transactions are leviable to VAT & Service Tax consequent to which no tax is payable under GST. 17. Now, as far as the award of Rs. 1.75 lacs as arbitration cost is concerned, the applicant states that it has been granted under section 31A of the of the Arbitration Act, 1996. The applicant has further stated that the compensation is awarded for delayed payment of the agreed consideration though there was no contract for payment of penalty or damages in the event or delay in payment. The applicant has further stated that the arbitration cost is not even covered under Clause 5(e) of the Schedule II of the CGST Act, 2017. The averment raised is that the goods/service were taxa....