GST not payable on liquidated damages if principal supply is exempt

In re Achampet Solar Private Limited (GST AAAR Telangana) The CBIC has issued Circular No. 178/10/2022-GST dated:3.8.2022 related to GST applicability on liquidated damages. As per para 7.1.6 of the said circular, it was, interalia, observed that when principal supply is exempt, the ancillary activities to such principal supply would not get attracted to GST. Since in the present case, the applicant’s principal supply is production and distribution of electricity, which is exempt from payment of GST, the liquidated damages received by the applicant towards such supply need to be considered a...