B Homes Ltd., was planning to construct a ten storied building complex in Pune. It obtained permission from the Corporation for the same. Another firm J Constructions was constructing a six storied building in the adjace

Taxability of compensation received: Agreeing to obligation to refrain from an act, or to tolerate an act or situation, or to do an act has been specifically declared to be a supply of service vide para 5(e) of Schedule II of the CGST Act, 2017 if the same constitutes a supply as per the CGST Act, 2017. In the given case, B Homes Ltd. has agreed to build only six floors, even though it is permitted to construct ten floors by the Corporation, for at one time compensation of ₹ 75 lakh. As a consequence, supply of service emerges. The conditions to be fulfilled are: There must be an expressed or implied agreement or contract must exist. Consideration must flow in return for this contract/agreement. Assuming that the amount of ₹ 75 lakhs is all inclusive, it has to be treated as inclusive of GST component; hence, GST will be ₹ 75,00,000 x 18/118 = ₹ 11,44,068 (CGST ₹ 5,72,034 and SGST ₹ 5,72,034)