AAR: No GST on Tree Cut Compensation amounts paid to Farmers and Land Owners during the execution of work
The Karnataka Authority for Advance Ruling ( AAR ) held that no GST for reimbursement of the tree cut compensation amount was paid to farmers and land owners during the execution of work.
The Applicant, M/s Sree Subha Sales is a Partnership concern registered under the provisions of the Central Goods and Services Tax Act, 2017 as well as the Karnataka Goods and Services Tax Act, 2017. The Applicant stated that they execute government projects on a tender basis and their main area of expertise is water supply and underground drainage works.
The applicant has sought the advance ruling in respect of the following question as to the applicability of GST for reimbursement of a tree cut compensation amount paid to farmers and land owners during the course of execution of work.
The Applicant stated that they execute government projects on a tender basis and their main area of expertise is water supply and underground drainage works. The Applicant has been awarded the contract for the establishment of a Substation from Karnataka Power Transmission Corporation Limited.
The Applicant stated that this compensation amount is not included in the contract amount (work order amount) and cheques are issued to beneficiaries based on calculations and rates set forth by KPTCL in consultation with respective departments. On the issue of these cheques and on the 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 Bench consisting of Dr. M.P. Ravi Prasad Additional Commissioner of Commercial Taxes Member (State) and Kiran Reddy T Additional Commissioner of Customs and Indirect Taxes Member (Central) held that “Reimbursement of the tree cut compensation amount paid to farmers during the course of execution of work is not chargeable to GST as the Applicant qualifies to be a Pure Agent.”