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Non-Compliance documents have not been submitted by the contractors debited

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This query is : Resolved

Magesh Sambath (Querist)

05 September 2026 Dear Sir,
The amount has been withheld because the required non-compliance documents have not been submitted by the sub contractor. The same was communicated to the contractor, and only thereafter was the amount debited included GST. for the year 2025-2026,

Please advise whether this is covered under the provision that penalties arising from a breach of contractual obligations are generally not liable to GST.

regards,
magesh

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)

06 September 2026 Amounts withheld or penalized due to a breach of contractual obligations (such as non-submission of compliance documents by a sub-contractor) generally do not attract GST, as they function as contractual remedies or price adjustments rather than consideration for a taxable service of "tolerating an act," provided no active agreement to tolerate the breach exists.

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