TaxTMI 
TaxTMI 
TaxTMI 
2025 (7) TMI 384
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....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 this period is to be received in the future; * the applicant did not pay any tax on the amount received since the work in respe....
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....hat 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 pursuance to the transfer of Member (Centre), fresh personal hearing was held on 22.5.2025, wherein Shri M.P.S. Sengar, Shri Rajesh Desai, Ms. Pranati Prabhu and Shri Sudhir Chavan, appeared on behalf of the applicant and reiterated the submission. It was further stated that interest is pertaining to supply which is already done and is co....
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....erence 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 section. (2) The time of supply of goods shall be the earlier of the following dates, namely :- (a) the date of issue of invoice by the supplier or the last date on which he is required, under [ **** ] section 31, to issue the invoice with respect to the supply; or (b) the date on which the supplier receives the payment with respect to the supply: Provided that where the supplier of taxable goods receives an amount up to one thousand rupee....
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....th 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 account, in a case where the provisions of clause (a) or clause (b) do not: apply Provided that where the supplier of taxable service receives an amount up to one thousand rupees in excess of the amount indicated in the tax invoice, the time of supply to the extent of such excess amount shall, at the option of the said supplier, be the date of issue of invoice relating to such excess amount. Explanation.- For the purposes of clauses (a) and (b)- (i) the supply shall be deemed to have been made to the extent it is covered by the invoice or, as the case may be, the payment; (ii) "the date of receipt of ....
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.... 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 under Chapter V of the Finance Act, 1994 (32 of 1994); (c) where tax was paid on any supply both under the Value Added Tax Act and under Chapter V of the Finance Act, 1994 (32 of 1994), tax shall be leviable under this Act and the taxable person shall be entitled to take credit of value added tax or service tax paid under the existing law to the extent of supplies made after the appointed day and such credit shall be calculated in such manner as may be prescribed. 10. The primary question posed before the Authority is whether the GST is payable on the 'interest awarded under Arbitration' and 'costs awarded under Arbitration' received by the applicant. The facts are already mentioned in paragraph above & hence is not being rep....
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....itration 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 taxable during pre-GST regime; that the amount awarded is not for provision of additional supply of goods or receipt of damages for breach of contract; that the interest is in respect of the amount withheld by Goa Shipyard Ltd; that it is not an amount payable on account of damages for breach of contract or a consideration for toleration of an act; that there was no contract or agreement between the parties for claiming damages or penalty for delayed payment. 18. We agree with the contention of the applicant. Circular No. 178/10/2022-GST dated 3.8.2022, [relied upon by the applicant], specifically states that 7.1.6 If a payment constitutes a consideration for a supply, then it is taxable irrespective of by what name it is called; it must be remembered that a "consid....