Order Date – 26 June 2025 

Facts –

• The Applicant, M/s. Shoft Shipyard P Ltd., had completed supply of ship hull and towing services to Goa Shipyard Ltd. (GSL) in the pre-GST era.
• An amount was withheld by GSL, which was later recovered in 2024 through arbitration, along with interest.

Issue –

• whether GST is applicable on the interest and arbitration cost received post-GST implementation?

Order –

• The  AAR observed that in this case there is no supply under GST owing to the fact that, the manufacture, clearance, sale and the date of invoice having taken place pre-GST. 
• Further, since the material portion and service portion of the transactions are leviable to VAT & Service Tax consequent to which no tax is payable under GST.
•  Hence it was held that the transactions pertains to pre-GST period, the question of the amounts falling under the ambit of GST in terms of clause 5(e) of Schedule II does not arise. Even otherwise, the work contract dated 21 .5.2009 does not contain any penalty or compensation clause for delay in payments made by GSL and further there is no clause for recovery of interest on delayed payment.
• Thus, the applicant is not liable to pay GST on the "interest awarded under arbitration" & "costs awarded under arbitration", received by them.