In re M/s. Maharashtra State Power Generation Co. Ltd (AAR Maharashtra)
Question 1
Whether GST is applicable on Liquidated Damages in case of Operation & Maintenance activities and Construction of new power plants or renovation of old plants Or is applicable in both cases?
We have not been provided with separate agreements in respect of the situations posed above. The facts of each agreement and the attending circumstances would have to be seen to provide an answer. We can only answer in terms of the agreement between Maharashtra State Power Generation Company Limited (Owner) and Bharat Heavy Electricals Limited (Contractor) for Erection & Commissioning of Main Plant Package at Chandrapur T.P.S. Expansion Project 2 x 500 MW that has been provided for our perusal. In terms of the aforesaid agreement, GST would be applicable on the Liquidated Damages.
Question 2
GST is applicable, kindly clarify the following related aspects also Whether the GST on Liquidated Damages is covered under Schedule II entry No 5(2) (e) vide HSN code 9997-Other services rate 18% is correct or any other entry is relevant?
We would be constrained to restrict the answer to this question in terms of the agreement placed before us. We have observed above that the impugned levy of liquidated damages would be covered by clause (e) of para 5 of Schedule II appended to the GST Act.
To answer the question as regards the schedule entry and the tax rate applicable, we find that there is no specific schedule entry in the Notification no. 11/2017 – Central / State Tax (Rate) [as amended from time to time] for taxable services and the Notification no. 12/2017 – Central / State Tax (Rate) [as amended from time to time] for services exempt from GST. A reference to the Annexure about Scheme of Classification of Services as appended to the Notification no. 11/2017 – Central / State Tax (Rate) [as amended from time to time] reveals thus –
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