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The amount of advance forfeited for sale of land will be considered as supply of service as per clause 5(e) of Schedule II of CGST Act, 2017 and therefore, liable to GST.

Levy of GST— The main issue is here to decide whether the amount forfeited on account of breach of agreement of sale of land is liable to GST or not. The applicant contention is that the amount of Rs. 20 lacs forfeited is on account of sale of land and as per Schedule III of CGST Act, 2017, sale of land is an activity or transaction, which is treated as, neither supply of goods nor service. Therefore, they have claimed that such transaction is not liable to GST. Held that— The purpose of payment of amount is an act of tolerance in the sense that when there is breach of the contract, the appellant is put to certain hardships, which he tolerates in return of the payment received as advance being forfeited. Therefore, the impugned transaction is also a ‘supply’ under the provisions of the CGST Act and therefore taxable. In our view, therefore, this transaction of the applicant agreeing to the obligation of refrain or tolerate or to do an act (exiting from the contract) on the part of Mr. B (customer), for payment of a sum, will be covered under Clause 5(e) to Schedule II to CGST Act 2017, as a declared service.
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