Levy of GST— In the instant case, the appicant is engaged in production and distribution of electricity obtained from solar energy. They have engaged M/s. Belectric India (P) Ltd for construction of solar power project. The agreement has clauses for recovery of liquidated damages on (2) counts, one delay in delivering of the contract and the other regarding non-performance of the plant. The applicant is desirous of ascertaining exigibility of liquidated damages to GST on account of delay in commissioning and its time of supply.

Question raised for advance ruling are as follows—

1. Whether liquidated damages recoverable by the applicant from Belectric India on account of delay in commissioning, qualify as a ‘supply’ under the GST law, thereby attracting the levy of GST?

2. If the answer to Question No. 1 is in the affirmative, what should be the time of supply when liability to pay GST is triggered?

Liquidated damages are demanded by the applicant from the contractor due to the delay in commissioning of the project and postponement in the taking over date beyond the milestones fixed for completion of project.

Held that—The Consideration received for such forbearace is taxable under CGST and SGST @9% each under the chapter head 9997 at serial no. 35 of Notification No.11/2017- Central/State tax rate.

The date on which the liquidated damage is determined as per the formula prescribed in the clause 6 of the contract is the time of supply of service entry in 5(e) of Schedule II by the applicant.