As per the CBIC vide Circular No. 178/10/2022-GST dated August 03, 2022 regarding GST applicability on liquidated damages, compensation and penalty arising out of breach of contract or other provisions of law.
No GST on :-
- Liquidated damages paid for breach of contract.
- Compensation given to previous allottees of coal blocks for cancellation of their licenses pursuant to Supreme Court Order.
- Cheque dishonour fine/penalty charged by a power distribution company from the customers
- Penalty paid by a mining company to State Government for unaccounted stock of river bed material
- Bond amount recovered from an employee leaving the employment before the agreed period
- Late payment charges collected by any service provider for late payment of bills.
- Fixed charges collected by a power generating company from State Electricity Boards (SEBs) or by SEBs/DISCOMs from individual customer for supply of electricity.
- Cancellation charges recovered by railways for cancellation of tickets, etc.
- Link of circular: https://taxinformation.cbic.gov.in/view-pdf/1003115/ENG/Circulars
- Advice for readers: pls refer definition of supply.