Question
We are a large manufacturing company Contractor not supplied Manpower as per contract. Submitted bill for actual man power supplied to us. We have charged a penalty for shortage of manpower. Please advise applicability of GST on penalty. what document should issue for penalty. We are also charging penalty for other unwanted acts like carring gutka/tobaccoo/Biri/Cigarettee from employee and out siders / notice pay from employee. Also please advise applicability of GST on this amount.
Answer
As per clause 5(e) of schedule II the following
is classified as deemed supply:-
" Agreeing to the obligation to refrain from an act, or to tolerate an act or a
situation, or to do an act; and".
Therefore, the penalty charged for the shortage of manpower will form part of
consideration.
The Company is required to raise invoice for the amount of penalty charged. The
HSN code of service is 9997 and tax is charged @ 18% as per S.no 35 of
notification no. 11/2017-Central Tax (Rate).(Reply dt. 27.06.2018)