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The compensation paid by GIDC would clearly qualify as ‘Supply’ under clause 5(e) of Schedule II of the GST Act, and therefore the amount would attract tax liability.

Classification of Supply — The applicant is seeking an Advance Ruling in respect of the following question “Is an obligation to refrain from an Act, or to tolerate an Act or a situation treated as supply of Goods/Services (Schedule II U/s 7 Scope of Supply)

Held that :- The applicant is a Government of Goa Undertaking and had entered into an agreement leasing land to parties for setting up Special Economic Zone (SEZ). However, this could not materialize due to protest from the people. As a result, deposit taken from the parties had to be refunded. However, GIDC refused to pay compensation on this deposit. As the original Deed of Lease never mentioned such clause. The parties approached the Supreme Court, who intervened and directed GIDC to compensate them @ 8.25%.

In the process the applicant has agreed to do an act of vacating the claim by parties of setting up SEZ units for which GSIDC has paid consideration.

Thus the original amount which is paid back along with compensation would clearly qualify as ‘Supply of Services’. — Goa Industrial Development Corporation, In Re… [2019] 17 TAXLOK.COM 117 (AAR-Goa)

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