Here, we present a number of GST law cases, intriguing at first, but provided for in a very simple manner by the Courts. You can guess what the solution will be by answering the polls accompanied with the question. The correct judgement pronounced by the Courts is mentioned at the bottom of the page.
Case #1
A company, operating its factory, had setup a small canteen to provide foodstuff and drinks to the workers working at their premises. The workers, could pay money and purchase food items from the canteen. The setting up of such a canteen is mandatory as per Section 46 of the Factories Act. Since such sales were being made on non-profit basis and setting up such a canteen was mandatory, GST was not paid by the company on such sales. In your opinion, was payment of GST on such sale necessary?
To know the answer, click here: Answer to Case #1 or scroll below.
Case #2
In another case, a warehouse for duty free ship stores, for supply of goods to Indian Naval/ Coast Guard Ships and ocean going merchant ships, wished to supply goods inter-state. The question was whether such goods shall be chargeable to tax or not.
To know the answer, click here: Answer to Case #2 or scroll below.
Case #3
The third case relates to the charge of GST on liquidated damages. A company engaged in setting up of power plants was contracted with by a company engaged in the production of power to setup a power plant within a specified timeline. In case of any violation of such timeline, damages shall be payable to the company engaging the company for setting up the power plant. Such charges, payable on default shall be known as liquidated damages. Such charges are not in the nature of income for the contracting party, since they are payable only to alleviate the losses suffered by the party on account of delay in construction. There is also no supply of goods or services against such payment. Shall GST be payable on such liquidated damages, in case they are paid out?
To know the answer, click here: Answer to Case #3 or scroll below.
Answers/ Judgements pronounced:
Case #1
The Court stated that the sale shall be taxable in the case of Nuclear Atomic Power Supply Canteen vs. CTO (2008). The same view was confirmed in a subsequent appeal by the Tribunal.
Case #2
The Court pronounced that such sales shall be chargeable to tax as inter-state sales and shall not be exempt from tax due to the fact that the supplier is a warehouse for duty free supply.
Case #3
This judgement was given by the Authority for Advance Rulings (AAR) for Maharashtra State Power Generation Co. Ltd. [2018] 97 taxmann.com 408. The AAR ruled that liquidated damages would be covered as independent supply and therefore, GST would be payable on such charges.
