Lakshmikumaran & Sridharan Represents Oil And Natural Gas Corporation Limited Before The Hon’ble Authority For Advance Ruling, Tamil Nadu

Lakshmikumaran & Sridharan Represents Oil and Natural Gas Corporation Limited Before the Hon’ble Authority for Advance Ruling, Tamil Nadu

The leading law firm, Lakshmikumaran & Sridharan Attorneys, successfully represented Oil and Natural Gas Corporation Limited (ONGC) before the Hon’ble Authority for Advance Ruling (AAR), Tamil Nadu. The ruling, pronounced on 24 September 2025, was in favour of the Applicant, holding that GST is not leviable on the amount charged and collected as Minimum Guaranteed Off-take Charges (‘MGO Charges’) towards non-performance of the conditions of the contract.

Court’s Findings

The Hon’ble Authority for Advance Ruling, Tamil Nadu, held that MGO Charges cannot be said to be a consideration received for tolerating the breach or non-performance of contract. Instead, they are payments made for not tolerating the breach of contract. Thus, the MGO Charges collected are “liquidated damages” paid to compensate for the injury or loss suffered by the Applicant due to breach of contract and are not in the nature of a consideration for “tolerating an act.”

Ruling and Reference
Accordingly, in line with Circular No. 178/10/2022-GST dated 03.08.2022, the Hon’ble AAR ruled that GST is not leviable on the MGO Charges collected by the Applicant.

Team Involved

The Applicant was represented by Adv. Nimrah Ali, Lakshmikumaran & Sridharan Attorneys.

Conclusion
This ruling reinforces the principle that contractual payments made as compensation for breach are not taxable under GST as consideration for tolerating an act, further strengthening jurisprudence around the interpretation of liquidated damages under GST law.

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