GST on Liquidated Damages
Query (Issue) Started By: – SARAVANAN RENGACHARY Dated:- 29-5-2018 Last Reply Date:- 29-5-2018 Goods and Services Tax – GST
Got 4 Replies
GST
Dear Experts,
As per recent Maharastra Advance Ruling, GST is applicable on Liquidated Damages.
Generally, Invoices are raised for full value with applicable GST as per the PO. Though the delivery is delayed and i.e. 10% LD is applicable, as accounting practice, invoice is raised for full value and GST on such full value is paid.
Customer will release the payment after deducting 10% LD. Such deducted amount will be treated as expenses in the books of supplier.
Scenario after Advance ruling:
It seems that the supplier has to raise the invoice for full value
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t customer has deducted the amount of liquidated damages then tax liability on such amount shall be discharged by the receiver of services under reverse charge mechanism provided the recipient of services must be a business entity located in taxable territory.
In order to substantiate our view, we would like to draw your kind attention towards entry no 5 of Notification No. -13/2017-Central Tax Rate dated 28.06.2017 and the same reads as under:-
5
Services supplied by the Central Government, State Government, Union territory or local authority to a business entity excluding, –
(1) renting of immovable property, and
(2) services specified below-
(i) services by the Department of Posts by way of speed post, express parcel post, life ins
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