Whether receipt of liquidated damages on account of delay in delivering of the contract and other non - performance amounts to Supply?

M/s. Achampet Solar Private Limited [AAAR, Telangana] Held: The CBIC has issued Circular No. 178/10/2022-GST dated 3.8.2022 related to GST applicability on liquidated damages. As per the circular where the amount paid as ‘liquidated damages’ is an amount paid only to compensate for the injury, loss, or damage suffered by the aggrieved party due to breach of the contract and there is no agreement, express or implied, by the aggrieved party receiving the liquidated damages, to do or abstain from doing anything for the party paying the liquidated damages, in such cases liquidated damages are merely a flow of money from the party who causes breach of the contract to the party who suffers loss or damage due to such breach. Such payments do not constitute consideration for a supply and are not taxable.