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Compensation Awarded by Court

sumit jain (student) (49 Points)

27 November 2018

In case of Bounced Cheque.....Court has awarded compensation to the petitioner.
Is the compensation awarded by the court is taxable???

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7 Replies

Hitesh (Student) (3549 Points)
Replied 27 November 2018

compensation awarded by court does not fall under the term income . hence not taxable

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sumit jain (student) (49 Points)
Replied 27 November 2018

Therefore GST too will not be charge on the same???

Hitesh (Student) (3549 Points)
Replied 27 November 2018

Yes agree with Vishesh ji

Yasam Naga Gopi (Practicing Chartered Accoutant) (61 Points)
Replied 27 November 2018

Here it may be the tolerance of act. But main condition is for furtherence of business. It is not a business. Hence GST is not applicable in my view.

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Pankaj Rawat (GST Practitioner) (55052 Points)
Replied 28 November 2018

@ Summit

Recently, the Maharashtra Authority for Advance Ruling ("AAR") in the case of Maharashtra State Power Generation Company Limited ("Applicant") held that Goods and Services Tax ("GST") at the rate of 18% would be payable on liquidated damages ("LD") received by the Applicant for delayed supply under a contract. The AAR has considered LD to be a consideration for agreeing to the obligation to tolerate an act or a situation, which is treated as a supply of service under para 5(e) of Schedule II of the Central Goods and Services Act, 2017 ("CGST Act")

Sum of money (agreed-to and written into a contract) specified as the total amount of compensation an aggrieved by party should get, if the other party breaches certain part(s) of the contract. The contract also establishes what actions or failures to act constitute a breach

Hence if compenation you got fall under the above definition , then its a supply , cover under GST

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Pankaj Rawat (GST Practitioner) (55052 Points)
Replied 28 November 2018

But in your case might LD is covered since its Penalty is awarded by a competent Court, in case one of the parties takes action against the other So , it will not cover Under GST .