In re Shoft Shipyard P Ltd (GST AAR Gujarat)
Shoft Shipyard P Ltd. is not liable for GST on interest and arbitration costs received from Goa Shipyard Ltd. (GSL) concerning a shipbuilding contract from 2009. The core issue was whether these receipts, stemming from an arbitration award for a pre-GST era supply, attract Goods and Services Tax. The applicant had completed a ship hull construction and towing for GSL, with most payments received, except for ₹1.39 crore which GSL withheld due to an alleged mistake in another contract. Shoft Shipyard wrote off this amount in 2012-13 but initiated arbitration in 2014, leading to an award in their favor in 2017 for the principal amount plus interest and arbitration costs. GSL contested the award, but eventually the principal was received in March 2020 and the interest and arbitration costs in 2024.
The Advance Ruling Authority (AAR) noted that the original supply (ship construction and towing) occurred entirely in the pre-GST regime, with the invoice raised before GST implementation. Central excise duty on hull construction was exempt, and service tax on towing had been paid. The AAR agreed with the applicant’s argument that since the supply and invoicing happened before GST, Sections 12 (Time of Supply of Goods) and 13 (Time of Supply of Services) of the CGST Act, 2017, including subsections related to additions in value for delayed payments (12(6) and 13(6)), do not apply. Furthermore, the AAR concurred that sections 142(10) and 142(11)(a) and (b) of the CGST Act support the applicant’s position, as the transactions were subject to VAT and Service Tax under the previous regime, precluding GST applicability.
