Krazybee Services Private Limited Vs Additional Director (Karnataka High Court)
Karnataka High Court held that liquidated damages on account of breach of the contract is not taxable under the provisions of Central Goods and Services Tax Act [CGST Act] in terms of circular no. 178/10/2022 dated 03.08.2022. Accordingly, the petition is allowed.
Facts- The present petition has been filed by the petitioner. It is mainly contested that the amount paid as compensation by the Lending Service Provider to the petitioner is in the form of ‘liquidated damages’ and is not taxable under the provisions of the CGST Act in terms of circular no. 178/10/2022 dated 03.08.2022.
Conclusion- A perusal of Master Service Agreement entered into between the petitioner and aforesaid LSPs will clearly indicate that any breach of contract committed by the aforesaid LSPs would entitle the petitioner to claim liquidated damages which is covered by Paragraph No.7 of the aforesaid Circular dated 03.08.2022 which mandates that a party to the contract who suffers such breach would be entitled to claim compensation from the other party towards such loss or damage caused to him by such breach or non-performance of the contract by either party in terms of Sections 73 and 74 of the Indian Contract Act, 1872.
