2026-VIL-30-AAR
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SGST Advance Ruling Authority

GST – West Bengal AAR - Taxability of amounts received by applicant pursuant to Arbitration Award, additional consideration on account of upward revision of price – Applicant entered into three agreements with THDC India Ltd for execution of work for the construction of Hydro Power Plants. Disputes arose during the execution of the work, and the matter was referred to Arbitration. The Arbitral Tribunal passed awards in favor of the applicant, allowing claims for extra expenditure, differential cost of cement, reimbursement of expenses, and refund of excess deductions. The applicant received the payment pursuant to Conciliation Proceedings and a Settlement Agreement in 2024 - Whether the claims allowed by the Arbitral Tribunal vide the Arbitration Awards constitute "liquidated damages" under GST or or whether they should be treated as additional consideration for the supply already made – HELD – The amounts awarded by the Arbitration Tribunal under different heads for the three packages can be categorised broadly under twelve heads - The claims allowed for extra expenditure due to change in the methodology, payment of price adjustment on extra items, deduction or deletion from final bill, extra expenditure for excavation of compressors and receiver's room, payment of cost of materials for pre-stressed anchor work, and extra expenditure for backfilling behind walls of TRT outlet, as well as the claims allowed as refund of rebate wrongfully recovered or deducted, are to be considered as "supply" under GST. On the other hand, the claims allowed for extra expenditure incurred in purchasing materials, operating private quarries, cost difference for use of higher grade cement, and reimbursement of expenditure for shifting of infrastructure facility are considered as "liquidated damages" and not taxable under GST – Ordered accordingly - Issue 3: Whether GST would be applicable for the cost of arbitration allowed vide Arbitration Award and received vide the Settlement Agreement – HELD - The arbitration as service has been provided by the Arbitration Tribunal to the applicant - Arbitration service will fall under Legal and Accounting services under heading no. 9982 and group no. 99821. The specific service is covered by service code no. 998215 - the cost of arbitration is taxable under reverse charge mechanism, as the applicant is the recipient of the arbitration services provided by the Arbitral Tribunal. The applicable GST rate would be 18% - The place of supply of such service is guided by Clause (a) of Section 12(2) of the IGST Act, 2017. Hence, the place of supply of arbitration service will be the location of the applicant i.e. West Bengal
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