Facts of the Case

Goa Shipyard Limited, the Judgment Debtor in five execution proceedings filed by Shoft Shipyard Pvt. Ltd. to enforce certain arbitral awards, challenged five orders of the Executing Court (Civil Judge, Senior Division, Vasco Da Gama) directing it to pay GST at 18% on the part payment of interest due under the awards. During the pendency of the writ petitions before the Bombay High Court, the Respondent (decree-holder) applied to the Gujarat Authority for Advance Ruling (AAR) on whether GST was at all payable on such amounts, and the Court had earlier, on 26.02.2025, directed the Executing Court to keep further execution in abeyance pending that ruling.

Issues Involved

  1. Whether GST is payable on interest and costs awarded to a decree-holder under an arbitral award.
  2. Whether an executing court's direction to pay GST on such interest, issued before the AAR's ruling, should be sustained once the AAR rules on the underlying tax question.

Petitioner's Arguments

  • The five execution orders directing payment of GST on part interest were premature and erroneous, and should be quashed once the correct tax position on arbitral interest is authoritatively determined.

Respondent's Arguments

  • The Respondent itself placed on record its application before the Gujarat AAR and, subsequently, the AAR's ruling dated 26.06.2025 holding that GST was not payable on 'interest awarded under arbitration' and 'costs awarded under arbitration'.

Court Order / Findings

  • Relying on the Gujarat AAR's ruling dated 26.06.2025 that GST is not payable on interest or costs awarded under arbitration, the Court held it was now obvious that the decree-holder need not pay GST on the amounts in question.
  • Consequently, the impugned executing-court order dated 02.08.2020 (and the connected orders in all five petitions) directing the Judgment Debtor to pay GST on part interest payment were quashed and set aside, as GST on such payments is not payable.
  • Rule was made absolute in terms of the petitions' prayer clause, with liberty to the Executing Court to proceed with execution of the arbitral awards otherwise, in accordance with law.

Important Clarification

  • GST is not chargeable on interest or costs awarded to a party under an arbitral award, per the Gujarat Authority for Advance Ruling's determination, which the Bombay High Court applied directly to quash a contrary executing-court direction.
  • An executing court's ancillary direction on a tax question can be revisited and set aside once a competent advance-ruling authority authoritatively rules on that very question during the pendency of a challenge.

Sections Involved

  • Section 97, CGST Act, 2017 – provides for applications for advance ruling, the mechanism the Respondent used before the Gujarat AAR.
  • Section 7, CGST Act, 2017 – defines 'supply', relevant to whether GST attaches to interest/costs received under an arbitral award.

Decision – In Favour of

The petitions were allowed in favour of the petitioner (Judgment Debtor), with the GST-on-interest direction quashed based on the AAR's ruling that such amounts are not taxable under GST.

Case Details

Court: High Court of Bombay at Goa. Case No.: Writ Petition No.770 of 2024 with connected Writ Petition Nos. 771, 773, 776 and 777 of 2024. Coram: Hon'ble Mr. Justice Valmiki Menezes. Date of Order: 6th August, 2025.

Link to Download the Order

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