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Circular: GST applicability on liquidated damages, compensation, and penalties arising out of breach of contract or other provision of law

A Circular issued by the Ministry of Finance, Government of India, on GST applicability on liquidated damages, compensation, and penalties arising out of breach of contract or other provision of law. The principles emanating from the document make an interesting read in the context the UAE VAT Law for the following transactions:

– Liquidated damages resulting from damages to property, negligence, unauthorized use of a trade name, etc.
– Compensation for the cancellation of any rights or interests
– Cheque dishonour fines/penalties
– Forfeiture of salary in the event the employee leaves the employment before the minimum agreed period
– Surcharge of fees for late payment
– Cancellation charges towards cancellation of hotel accommodation booking, entertainment event, or a holiday package, etc.
– Fees or penalty toward early termination of a lease contract for movable or immovable property

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