Question ID : 20183

Whether penalty for safety violation is a service under GST laws?

In various contracts awarded by PSUs relating to supply and erection of new plant and equipment OR repairs and maintenance of exiting plant and equipment, there is a safety code clause in the contract to be complied by contractors. If a contractor violates the safety precautions, a penalty is imposed on the contractor and recovered from their bills. Such recovery is purely punitive in nature and may not be termed as an act of tolerance because it does not relieve the contractor from any obligation or responsibility. Whether such penalty is a service provided by the Principal to the Contractor under GST laws for the purpose of levying GST thereon? If it is a service, what SAC should be used?

posted by P K Agarwal on Sep 24 2017 12:00AM