GST on forfeited amount of security deposit
This query is : Resolved
29 December 2021
Dear Sir/Madam,
Could you please educate me 'Whether the forfeited amount of security deposit would attract GST'?....
Thank you
Could you please educate me 'Whether the forfeited amount of security deposit would attract GST'?....
Thank you
29 December 2021
No GST as it will not fall under supply.
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30 December 2021
Thanks a lot for the support and time Sir...
30 December 2021
Sorry for the earlier reply.
GST applicable on such forfeiture.
“As per Section 7(1) of the CGST Act, 2017, activities referred to in Schedule II are covered under the scope of supply of goods and service. Clause 5(e) to Schedule II to CGST Act 2017, declares that ‘agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act’ shall be treated as supply of service. The amount, which was received and forfeited by the applicant, was a part of the terms and condition of an agreement held between the applicant and customer. This means that while entering into the agreement, Customer was well aware about the terms and condition of the contract that in absence of breach of agreement or non- fulfillment of terms and condition of payment as per the contract, the amount given as an advance would become forfeited by the applicant being settlement of exit of the contract,” the AAR said.
The AAR said that the amount forfeited/ received by the applicant is covered under supply of service as per clause 5(e) of Schedule II of CGST Act, 2017 and therefore, liable to GST.
GST applicable on such forfeiture.
“As per Section 7(1) of the CGST Act, 2017, activities referred to in Schedule II are covered under the scope of supply of goods and service. Clause 5(e) to Schedule II to CGST Act 2017, declares that ‘agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act’ shall be treated as supply of service. The amount, which was received and forfeited by the applicant, was a part of the terms and condition of an agreement held between the applicant and customer. This means that while entering into the agreement, Customer was well aware about the terms and condition of the contract that in absence of breach of agreement or non- fulfillment of terms and condition of payment as per the contract, the amount given as an advance would become forfeited by the applicant being settlement of exit of the contract,” the AAR said.
The AAR said that the amount forfeited/ received by the applicant is covered under supply of service as per clause 5(e) of Schedule II of CGST Act, 2017 and therefore, liable to GST.
31 December 2021
Forfeiture of security deposit is generally against supplies for which consideration was not received. Forfeiture will render the deposit becoming consideration. GST applicable.
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01 January 2022
Okay...Thanks a lot for the information and support....
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