Goods and Services Tax – What items have been newly included in the Regime

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Ever since GST has been implemented, government and other concerned authorities are working to make it more comprehensive and simple. There have been number of changes in the goods and services that would come under the purview of Goods and Services Tax and those that have been kept out of it. Recently, the Authority of Advance Ruling announced that payments made in respect to nonperformance of the contract would be liable to Goods and Services Tax.

As per the Contract Act, damaged under a contract are considered as pre-estimates in order to retain simplicity and keep the computation of damages and possible contractual disputes as well as litigation related hassles at bay in case the company does not perform. According to the Maharashtra Authority for Advance Ruling liquidated damages paid on operation& Maintenance and erection& commissioning contracts, offered by the applicant, Maharashtra State Power Generation Company would be taxable at the rate of 18% under GST.

Goods and Services Tax

Goods and Services Tax

Providing further clarification of the term ‘damaged’, the authority stated that liquidated damages would come under the deemed service, covered under the phase “‘agreeing to tolerate an act or situation’, under Para 5 of Schedule II of Goods and Services Tax Acts. Until now, the industry did not pay any service tax on these before GST and since the inception of the new tax rules, they have maintained the same status.

Industries maintain that the requirement for an activity to be paid come under GST is that ‘‘supply’ and the consequent ‘consumption’ should be met. Since, in the case of liquidates damages, it is not possible and therefore it should not be taxable.

Similarly, GST at the rate of 28% will also be levied on the E-rickshaw tyres, the highest slab. Since these tyres are registered under the ‘motor vehicles’  under the Motor Vehicles Act according to the Authority of Advance Ruling. The AAR has specified that the topmost requisite of the ‘powered cycle rickshaw’ is that it does not have pedal and therefore the GST of 28% has been levied. As per the GST regime, the tax is divided equally between the Centre and the States and therefore Pneumatic tyres or inner tubes fitted into the bi-cycles, three-wheeled powered cycle rickshaws and cycle rickshaws would attract the GST of 5% whereas ‘new pneumatic tyres are taxed at the rate of 28%.

There have been a lot of changes in the Goods and Services Tax norms, rules and regulations, goods and services that would be in an out of the framework and so on. It is always advisable for the general public to have thorough understanding of the GST and items that have been excluded and included recently to make sure that they are not being charged anything over and above GST on and goods or service.


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An MBA in finance, I like to cover the wide range of topics related to Taxation, SEBI, Finance and anything that is Public Helpful. The motive is always to make it simpler for the taxpayers understand the system better and take informed decisions.

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