GST on Cancellation of Agreement to Sell

Mr A had sold a property for say Rs. 1 Crore and received an advance of Rs. 50 lakhs from Mr B at the time of making the sale agreement.

Now after 3 months the buyer is not able to make the complete payment. Both parties agreed that the buyer can get some other buyer say Mr C. If Mr C payes Rs. 1 crore to the seller the seller will return the complete advance to previous seller.  If not say Mr C payes only 79 lakhs Mr A will hold 21 lakhs and pay 29 lakhs back to Mr B. Now is 21 lakhs received Will be liable to pay GST ?

Answer It is tolerating an act or situation which is deemed service and GST will be payable on Rs 21 lakhs.

As per Section 9 of CGST Act 2017

Levy and Collection.

 9.  (1) Subject to the provisions of sub-section (2), there shall be levied a tax called the central goods and services tax on all intra-State supplies of goods or services or both………….

As per Section 5 of IGST Act 2017

Levy and collection.

 5. (1) Subject to the provisions of sub-section (2), there shall be levied a tax called the integrated goods and services tax on all inter-State supplies of goods or services or both,

Comment : GST is levied on Supply of Goods or Services or Both.

As per Section 7 of CGST Act 2017

Scope of supply.

 7.(1) For the purposes of this Act, the expression “supply” includes—

………..

Comment : As per Section 7 , Activities mentioned in Schedule II are also Supply.

Refer Schedule II of CGST Act 2017  : ACTIVITIES TO BE TREATED AS SUPPLY OF GOODS OR SUPPLY OF SERVICES

5. Supply of services

The following shall be treated as supply of services, namely:—

…….

Comment : As per Schedule II of CGST Act, if the person refrain from an act or tolerate an act or situation or to do an act than it will be treated as Supply of Services

GST Scope of Supply : Free Study Material