GST DAILY – 96 – Liquidated damages paid to compensate injury or loss of damage suffered due to breach of contract is not taxable

👉 In the case of TPSC (INDIA) PVT. LTD. The Telangana bench of the AAR decided on 17-4-2023

 Issue:-

✔️ Whether Liquidated damages paid to compensate for injury or loss of damage suffered due to breach of contract is taxable?

 Replies:- ✔️ Where applicant, a works contractor breached their promise to award total work to their sub-contractor resulting in payment of liquidated damages and said liquidated damages were paid only to compensate injury or loss of damage suffered by aggrieved party due to breach of contract is not taxable under CGST Act, 2017 as there is no supply of service as per entry No. 5(e) of Schedule II of CGST Act, 2017.