In a significant relief for a judgment debtor facing multiple execution proceedings, the Bombay High Court at Goa has set aside orders passed by the Civil Judge, Senior Division, Vasco da Gama, which had directed payment of Goods and Services Tax (GST) on part-payment of interest awarded in arbitral proceedings.
The case stemmed from five execution applications filed by decree holders seeking enforcement of arbitral awards. The petitioner, common to all matters, was the judgment debtor. In each proceeding, decree holders had moved applications (Exh.20) seeking directions for the judgment debtor to pay GST at 18% on part-payment of interest under the awards. The executing court allowed the plea and ordered GST payment, prompting the debtor to approach the High Court.
During the pendency of the writ petitions, the decree holders themselves sought clarity by approaching the Gujarat Authority for Advance Ruling (AAR) on GST. The High Court, through its interim order dated February 26, 2025, directed the executing court to keep further execution of the disputed GST component in abeyance until the AAR’s decision.
On June 26, 2025, the Gujarat AAR categorically ruled that no GST is payable on “interest awarded under arbitration” or on “costs awarded under arbitration.” Relying on this ruling, the High Court observed that the basis for the execution orders had collapsed. Accordingly, the court quashed and set aside the impugned order dated August 2, 2020, along with all consequential directions.
The court has clarified that arbitral interest and costs awarded in such proceedings cannot be subjected to GST, offering clarity on a matter that has significant implications for arbitration-related recoveries and taxation.
Case Details
Case Title: Goa Shipyard Limited Versus Shoft Shipyard Pvt. Limited
Case No.: Writ Petition No.770 Of 2024
Date: 6th August, 2025
Counsel For Petitioner: S.D. Padiyar, Senior Advocate
Counsel For Respondent: Nikhil Pai
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