AAR Rules GST Applicable on Price Escalation Payments Received Post-GST for Pre-GST Coal Supplies

Karam Chand Thapar & Bros (Coal Sales) Limited, engaged in coal liaisoning, logistics and allied supply services, had entered into multiple agreements with State Power Utilities and private entities prior to 1 July 2017 under the Service Tax/VAT regime. These contracts contained clauses relating to price escalation, grade variation adjustments and performance-based bonuses.

After GST implementation, the applicant received additional amounts arising from upward price revisions and quality-linked adjustments under those pre-GST contracts. Since the supplies had been completed prior to the GST rollout, the applicant approached the Authority for Advance Ruling seeking clarification on whether such post-GST receipts would be governed by the earlier tax regime or would attract GST under the transitional provisions of the CGST Act.

Main Issue: Whether additional consideration received after 1 July 2017, on account of upward price revisions and bonus clauses in respect of coal supplies and services completed before the GST regime, is liable to GST under Section 142(2)(a) of the CGST Act, 2017.

AAR’s Ruling: The Authority held that the payments are liable to GST. It relied on Section 142(2)(a) of the CGST Act, 2017, which specifically covers cases where, after a contract entered into before the appointed day, the price of goods or services is revised upwards on or after 1 July 2017. The provision mandates issuance of a supplementary invoice or debit note within thirty days of such revision and deems such document to have been issued in respect of an outward supply under the GST law.

The Authority observed that although the contracts were executed before GST and the underlying supplies were completed earlier, the upward price revisions crystallised only after the appointed day. Therefore, the statutory requirements of Section 142(2)(a) stood fulfilled. The additional amounts received were therefore treated as consideration for outward supplies under the GST regime and held taxable under the CGST/WBGST Act.

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