GST Applicability to Compensation for Liquidated Damages in Agreements

GST Applicability to Compensation for Liquidated Damages in Agreements

In a recent ruling by the Andhra Pradesh Authority for Advance Ruling (AAR) in AAR No. 12/AP/GST/2023 dated December 21, 2023, significant clarity was provided regarding the GST implications of compensation collected for liquidated damages under contractual agreements. This ruling pertains to the case of South India Krishna Oil & Fats (P.) Ltd. (“the Applicant”), a manufacturer of edible oils, and sheds light on whether such compensation amounts are subject to GST and the related input tax credit implications.

Facts of the Case:

Held:

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