GST
TRT-2025-
AAR Karnataka
Date:-27-10-22
In:-
Issue Favourable to Tax Payer ?:-
Order Date: 27-10-2022
Facts:
- The applicant, M/s. SREE SUBHA SALES, execute government projects on a tender basis and their main area of expertise is water supply and underground drainage works.
- As per the agreement entered between them and KPTCL, the work order amount does not include the compensation amount paid to farmers. It is being paid as mere reimbursement regarding this they have obtained clarification from the financial advisor of KPTCL that, this transaction does not attract GST.
- The applicant states that the amount is being paid as compensation to the affected as per detailed work award Section V, clause 1.4 of special conditions of the contract. Tree cutting, tree cut compensation, crop compensation would be arranged to be paid by the contractor.
Issue:
- Whether reimbursement of the tree cut compensation amount paid to farmers and land owners during the course of execution of work is not chargeable to GST being Applicant qualifies to be a Pure Agent ?
Order:
- The authorities observed that reimbursement bills are raised to KPTCL by applicant for the compensation amount paid to farmers /land owners during execution of the project. This compensation amount is not included in the contract amount (work order amount) and cheques are issued to beneficiary based on calculation and rates set forth by KPTCL in consultation with respective departments. On issue of these cheques and on realization of the amount in the beneficiary’s account, the applicant raises a bill to KPTCL with necessary proofs and documents for reimbursement of the same.
- The applicant herein is raising the reimbursement bill for the compensation (tree cut compensation/ crop compensation) paid to farmers once the cheques issued by the applicant to the farmers are realized in the bank.
- The documents can be considered as the agreement with KPTCL to act as his pure agent to incur expenditure or costs in the course of supply of goods or services. However, agreement does not mention anything about land compensation.
- Hence, reimbursement of tree cut compensation amount paid to farmers and land owners during the course of execution of work is not chargeable to GST as the Applicant qualifies to be a Pure Agent.
- Reimbursement of land compensation amount paid to farmers and land owners during the course of execution of work is chargeable to GST as the Applicant does not qualifies to be a Pure Agent.
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