more-in The Maharashtra Advance Ruling Authority recently said that Goods and Services Tax (GST) will be applicable on liquidated damages(LD) as an independent levy. A Bench of B.V. Borhade and Pankaj Kumar, Joint Commissioners of State Tax, was hearing a plea filed by Maharashtra State Power Generation Company Limited (Mahagenco). The Bench had to determine the liability to pay tax on any goods or services or both, and whether any particular thing done by the company with respect to any goods or service, or both, amounts to or results in a supply of goods. Mahagenco is a State Power Utility engaged in generation of power with objective to make power available to all at affordable rates. In various contracts entered by the company, there is a clause to deduct LD in case of default by the contractor/vendor to complete the work on time. The plea They sought to know whether GST is applicable on LD in case of operation and maintenance activities or on construction of new power plants or renovation of old plants or both. The Bench ruled, “GST will be applicable on Liquidated Damages…we have observed that the impugned levy of liquidated damages would be recovered by clauses of the GST Act and in terms of the aforesaid agreement, the schedule entry of Central/State Tax (Rate) for taxable services will cover the impugned levy of liquidated damages.” ‘Series of litigation’ Abhishek Jain, Tax Partner, Ernst and Young India said, “ While the ruling corroborates the view of revenue authorities (who have been contending a service tax levy on similar lines), it may entail opening of a series of litigation for industry players who have taken a no tax position on such recoveries.”

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