Amount Deposited in Escrow account against bank guarantee pending for Arbitral not liable to GST: AAR

The Gujarat Authority for Advance Ruling (AAR, Gujarat) ruled out that the Amount Deposited in the Escrow account against the bank guarantee pending Arbitral is not liable to GST.

A company viz. M/s Dedicated Freight Corridor Corporation of India Limited (hereinafter referred as Applicant), a PSU under the ownership and control of the Ministry of Railways and incorporated under the Companies Act, 1956, is registered with the department and their registration number is 24AACCD4768M1ZB.

The Question and Ruling are:

Questions:

1. Whether the amount deposited by the applicant (75%) in esrow account against bank guarantee pending outcome of the further challenge against Arbitral Award or dissatisfaction against DAB decision, is liable to GST under the provisions of CGST Act, 2017?

2. If the answer to first question is in affirmative, then, what shall be the ‘time of supply’ when tax on such DAB/arbitral award is payable to Government exchequer, i.e., whether tax is payable (a) when part amount (75%) is deposited into escrow account pending litigation, or (b) when complete award amount ( 100%) is paid to the contractor pursuant to finality of the decision.

3. If answer to Question No. 1 is affirmative, whether the applicant is eligible to claim lnput Tax Credit (ITC) thereupon?

Rulings:

1. The amount deposited by the applicant (75%) in escrow account against bank guarantee pending outcome of the further challenge against Arbitral Award or dissatisfaction against DAB decision, is not liable to GST under the provisions of CGST Act, 2017.

2. Since the answer to first question is negative, the second and third questions are rendered infructuous.

For Official Ruling Download the PDF Given Below: