Liquidated damages are typically levied in cases of breach of contract, failure to perform, non-delivery of supplies, etc. Does payment of liquidated damages attract GST? Indian businesses face a lot of confusion regarding charging GST on liquidated damages such as the penalty paid, compensations, etc. Accordingly, the Ministry of Finance issued a circular no.178/10/2022-GST on 3rd August 2022. In this article, we will discuss the meaning of liquidated damages, applicability of GST, the GST Circular impact and rates of GST applicable on liquidated damages.What are Liquidated Damages?Liquidated damages refer to an amount stipulated in a contract, to estimate the actual damages incurred by one party for a specific breach by the other party. In simple words, liquidated damages are nothing but compensation for breaching a contract.Liquidated damages are usually ascertained where the loss is intangible. A clause in the contract will specify the amount of money that needs to be paid for failure to perform under the contract.For example, in case of a delay in the supply of raw materials by a seller, thereby leading to a loss of revenue by a manufacturer, the seller is obligated to pay 0.5% of the revenue lost for each week of delay, until the delivery has been made.Applicability of GST on Liquidated DamagesAs per the Central Goods and Services Tax (CGST) Act, Section 7(1)(d), the Scope of Supply definition includes activities referred to in Schedule II of the Act.

The Finance Bill 2022 introduced a new section in the Central Goods and Services Tax (CGST) Act, 2017 by way of substituting the existing Section 38. The revised Section 38 was proposed in a bid to further tighten input tax credit (ITC) claims, owing to the extent of ITC fraud that takes place by way of fake entities and fake invoices. The provisions of this section will also help avoid any matters of litigations in the court of law.Latest updatesUnion Budget 2025- 1st Feb 2025Manual validation of invoices may now be required as GSTR-2B may no longer be fully system-generated as CGST Section 38(1) is being amended to omit the expression "autogenerated".New clause (c) under CGST Section 38(2) allows the government to specify additional ITC statement details, increasing compliance requirements.Let’s decode the new Section 38 and find out how it will impact the ITC claims of a business.How does the Existing Section 38 Govern ITC Claims?The existing Section 38 of the CGST Act is titled ‘Furnishing details of inward supplies’. It governed the furnishing of details of outward supplies (i.e. sales) by a supplier, followed by the recipient (buyer) accepting such inward supplies (i.e.

The Central Goods and Services Tax (CGST) is an important part of India’s GST system, introduced on July 1, 2017. The GST law replaced several old indirect taxes from the central and state governments with one unified system. Let’s take a closer look at CGST, its key features, benefits, and calculation. What is CGST?Beginning with the full form, CGST refers to Central Goods and Services Tax and is a type of indirect tax under Goods and Services Tax (GST) in India. CGST ApplicabilityCGST applies on intrastate transactions, i.e. on goods and services that are traded within the same state. On such transactions, the government collects both CGST and SGST (State Goods and Services Tax).

If data is the new oil, then definitely the engine it fuels is business intelligence. And every engine requires high-quality fuel to perform at its best. This article explains ETL as a critical process in the growing fields of data mining, data warehousing and business analytics. Stay with us to learn everything about what, when and how of ETL. What is ETL?The ETL full form is Extract, Transform and Load. It’s a process followed in data mining, extraction and warehousing, especially when data is being collected from multiple sources of varying data structures. The rules and principles followed in designing an ETL process depend on business use cases.

Compliance risk management is one of the most important factors influencing business success. However, a lot of businesses neglect this part of their operations in favour of more important ones like marketing and cash flow. In this article, you will explore what is compliance risk management and how to manage compliance risk. We will also provide you with the best practices for managing compliance risks efficiently. What is Compliance Risk Management?Compliance risk management means understanding the risks associated with non-compliance with rules and regulations. The objective of compliance risk management is to reduce legal penalties, losses and any financial impact.

Direct and indirect taxes have different implications for businesses, and every company needs to comply with rules and regulations specific to each tax system. GST, an indirect tax, is levied on sales, while corporate income tax is charged on net taxable income. How much does direct and indirect tax compliance differ? Stay with us to learn more on this topic. Importance of Tax Compliance for Indian BusinessesTax compliance is an inseparable part of doing business in any country. Companies operating in multiple geographies are required to adhere to tax laws in each of those regions. The same applies to Indian businesses. The key reasons behind the necessity of tax compliance for companies in India are: Avoiding legal ramifications - Failure to comply with tax laws and regulations can cause serious legal ramification for businesses in India. It can be as minimum as levying of penalties to as severe as seizure of company assets and imprisonment of business promoters and managers. Continuity of business operations - It is the responsibility of a company to learn about the applicability of taxes on its business.

Today, organisations are increasingly relying on third-party vendors to improve their operations and increase growth. These partnerships bring multiple benefits but also several serious risks. It may cause disruption to business continuity and damage to the company’s reputation. Therefore, every large enterprise must have a strong vendor risk management programme in place to detect, measure and overcome vendor-related risks. In this article, we cover the key aspects of vendor risk management, such as audit checklists, workflows, reporting mechanisms, advantages and best practices.What is Vendor Risk Management?Vendor risk management (VRM) is a continuous due diligence process to identify, evaluate, manage and mitigate the risks resulting from third-party vendors and business partners for the duration of a business contract. The process helps an enterprise acknowledge red flags related to poor data security controls, cyber security failures, regulatory violations and supply chain disruptions that can be avoided with timely intervention. A properly structured VRM programme will make sure that the vendors are working in compliance with the company’s security policy and regulatory standards to protect sensitive business information while the business contract is active.Types of Vendor RisksVendors hold the potential to destabilise business operations with various types of risks, such as:Operational Risks: This risk stems from internal or external events with the potential to disrupt services provided by a vendor.

Did you know that almost 50% of Indian businesses are now dealing with procurement fraud? So, it’s no surprise that businesses are adopting online vendor registration through e-procurement platforms to stay clear of muddy water. However, for enterprises and suppliers new to the digital onboarding system, there are a lot of burning questions. What is vendor registration? How to fill in vendor registration forms?In this article, we will tell you all about the process of vendor registration, forms, requirements, templates and more.What is Vendor Registration? As the name suggests, it is the process where a supplier registers itself as a vendor for a company. Large companies working with multiple suppliers find it hard to scheme through vendor applications during the selection process. Hence, in recent times, companies are accepting verified vendor profiles through their own procurement platform or through vendor portals.Suppliers register themselves on the procurement or vendor portal through a vendor registration form.

Nowadays, any global organisation's long term growth and prosperity is dependent upon their supplier code of conduct. This is a kind of a manual which reflects the expectation of the company with their suppliers. But, what is the need to convey these expectations to them? This article will clarify the meaning of supplier code of conduct, how to formulate the policy and its benefits. What is Supplier Code of Conduct?This is the actual set of rules or guidelines that a company expects its suppliers to follow, that details out certain ethical and business practices required when conducting business with the company. For example: Suppliers must pay fair wages, avoid child labour, and have anti-corruption measures in place.Supplier Code of Conduct PolicyA supplier code of conduct policy is a document that displays the expected ethical business practices from a supplier. This manual usually contains the guidelines and standards and the way the organisation measures those standards.Key Elements of a Supplier Code of Conduct Policy This supplier code of conduct covers certain important aspects of a supplier code of conduct policy, though every organisation can customise it according to their specific ethical norms. Business IntegrityEthical behaviour is the base for companies in all business dealings and is the same behaviour that they expect from their suppliers.

To run your business smoothly, you must learn how to manage your vendor data properly. Yet, many organisations struggle with incomplete information, outdated records, and miscommunication with suppliers. SAP’s Vendor Master tables provide a structured framework to store, manage, and track vendor information across different domains to address specific challenges you might face in building a reliable community of suppliers. What is the Vendor Master Table in SAP?The vendor master table is a central database used by a company to store and retrieve vendor-related information. This table simplifies how every team of a business, from procurements to accounts payable, interacts with vendors. As every member of your business is accessing unified information, this eliminates the risk of errors, such as incorrect payments or miscommunication with suppliers. When you manage several vendors without streamlined data, it becomes difficult to keep a tap on efficiency and meet compliance with regulations.