Liquidated Damages Not Taxable Under GST for Contract Breach | AAR

  • Blog|News|GST & Customs|
  • 2 Min Read
  • By Taxmann
  • |
  • Last Updated on 22 November, 2025

Latest from Taxmann

liquidated damages

Case Details: JBM Ecolife Mobility Surat (P.) Ltd., In re [2025] 180 taxmann.com 431 (AAR-GUJARAT)

Judiciary and Counsel Details

  • Sushma Vora & Vishal Malani, Member
  • Atul Gupta and Kavish Goyal, CAs for the Applicant.

Facts of the Case

The applicant, registered under GST and operating as a concessionaire, submitted that it had executed a Concession Agreement with the Surat Municipal Corporation and, pursuant to a later tripartite arrangement, assumed operations and maintenance obligations. It was submitted that the Concession Agreement obligated the applicant to supply buses, operate and maintain the fleet, and develop related depot and charging infrastructure, with liquidated damages prescribed for specified operational defaults. The matter was accordingly placed before the Authority for Advance Ruling (AAR).

AAR Held

The AAR held that the liquidated damages claimed constituted genuine pre-estimated loss under the agreement and were compensation for breach, and fell outside the scope of supply under Section 7 of the CGST Act and the Gujarat GST Act. It was observed that the agreement did not involve any party agreeing to tolerate any default and the charges merely enforced contractual discipline. Accordingly, it was held that the liquidated damages were not liable to GST, and therefore, no questions regarding the rate, SAC, or ITC arose.

List of Cases Reviewed

List of Cases Referred to

Disclaimer: The content/information published on the website is only for general information of the user and shall not be construed as legal advice. While the Taxmann has exercised reasonable efforts to ensure the veracity of information/content published, Taxmann shall be under no liability in any manner whatsoever for incorrect information, if any.

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that’s easy to read and remain consistent across all imprint and digital publications are applied

Leave a Reply

Your email address will not be published. Required fields are marked *

«
»

Everything on Tax and Corporate Laws of India

To subscribe to our weekly newsletter please log in/register on Taxmann.com

Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied