The applicant, here, is M/s Goa Industrial Development Corporation (GIDC), which is a government undertaking. The corporation undertook the contract where it was giving land as lease to parties to make the particular area as Special Economic Zone (SEZ) unit. There was also protest against this project and then the project failed.
All leaseholders asked the GIDC to compensate all the losses which are incurred by the parties under lease agreement. In response to that, compensation @8.25% is released to parties under Supreme Court order.
However, the issue raised was whether such compensation paid to parties is considered as a ‘Supply of Services’ under the GST payable Act or not?
The Goa Authority for Advance Ruling (AAR) held that compensation paid for setting up of Special Economic Zone (SEZ) unit will be considered as a ‘supply of services’ under Goods and Service Tax (GST) Act and GST will be payable. Therefore, the applicant is liable to pay tax on all the compensation which will be given to the parties under lease agreement.