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Tolerating an act for a consideration is a taxable service: Expert

Tolerating an act for a consideration is a taxable service: Expert

The payment from the Chinese supplier is a consideration for your tolerating his act of not supplying the goods as agreed. S.No. 5(e) of Schedule II of the CGST Act, 2017 (relevant extracts) specifies the activity of agreeing to the obligation to refrain from an act, or to tolerate an act, or a situation, or …to be treated as supply of service. Also, Section 2(31)(b) of CGST Act, 2017 (relevant extracts) says that “consideration includes the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services...” S.No. 720 in the Table given in the notification 11/2017-CT (Rate) dated June 28, 2017, mentions “agreeing to tolerate an act” against the service code 999794. S.No. 35 in the Table in the notification 8/2017-IT (Rate) dated June 28, 2017, prescribes 18 per cent GST for services specified in that residual entry under the heading 9997. In my opinion, as it is a service you provide to the foreign party, it can be treated as “export of service” and be zero-rated

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