Case Law Details
In Re Louis Dreyfus Company India Pvt. Ltd. (GST AAR Punjab)
Applicability of GST on the differential payment received by a party to the aforesaid contract from the other party to the contract is event of ‘Settlement’, ‘Washout’ or ‘Closure’ of Contract by it?
In the present case, there is clearly an agreement between the contracting parties to refrain from bringing in arbitration, which is also built in the contract, if the contract is settled by payment of agreed amount of monies. Therefore, this activity can clearly be considered as supply of service by ‘agreeing to the obligation to refrain from an act’, and would therefore by subject to applicable tax. The present activity is also a toleration of the act of not providing the other party to the contract, the agreed quantity of goods at agreed prices at the agreed date, on payment of agreed amount of monies to settle the contract. Therefore, this would be liable for consideration as supply of service by way of agreeing to the obligation to tolerate an act or a situation. It is also clear that the applicant and the other contracting party are agreeing to the obligation of doing an act
(ii) In forward contracts in cotton sales, being settled by M/s Louis Dreyfus Company India Pvt. Ltd. with the other party to the contract by way of payment of the differential of forward rate and rate fixed by the applicant using his discretion, such rate being different than the market price of cotton on the date of settlement, the same would not be falling within the purview of `securities’ as defined in Section 2(101) of the CGST Act, 2017 and would therefore be chargeable to GST.
(iii) In the forward contracts in cotton purchase being settled by M/s Louis Dreyfus Company India Pvt. Ltd. with the other party to the contract by way of payment of the differential of forward rate and prevailing market rate on the settlement date, the same would be falling within the purview of ‘securities’ as defined in Section 2(101) of the CGST Act, 2017and would therefore not be chargeable to GST.
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