Perks furnished by employer to an personnel not liable to GST: CBIC clarifies

BENGALURU : Perquisites supplied by an employer to an staff underneath the contractual settlement would not be subjected to items and services tax (GST), the central board of indirect taxes and customs has clarified, which would put an close to ongoing litigations on the challenge. This will be applicable from July 2017. This is part of the slew of clarifications that the Board has issued regarding selections by the GST Council taken all through the two-day meeting in Chandigarh very last week.

The Board has also clarified that GST payable as a result of departmental audits and assessments can be made employing GST credits, rather of generating dollars payments, a transfer that will enable many organizations getting amassed tax credits.

There are a slew of litigations encompassing GST applicability in excess of perquisites available to staff and the divergent advance rulings on the subject led to confusion. A perquisite is a non-cash reward granted by an employer to the staff this sort of as transportation, canteen, health care, insurance policies, for their employees.

 “Transactions between connected events are subject to GST levy even if made with out a thought. Even further, employers and workers are considered connected below GST, though any thought payable to an personnel by the employer in the system of work was saved exterior GST purview. All of this led to confusion regarding applicability of GST on benefits /perquisites delivered by employers to staff members,” reported Abhishek Jain, tax lover, KPMG.  “It is great to see the Governing administration clarify that perquisites provided as a portion of the contractual agreement involving employer and staff will not be liable to GST, which was also the industry look at,” additional Jain.

Even though Maharashtra Authority of Advance Ruling (AAR) had in the circumstance of Tata Motor held that bus facility offered by the employer to the staff at a nominal rate was not liable to GST Having said that, in a related circumstance of Beumer India, the Haryana AAR took a opposite stance and dominated that the transportation facility provided to staff would appear underneath GST. In a different circumstance, the Kerala Appellate AAR (AAAR) experienced dominated in the circumstance of Caltech Polymers that foodstuff bills recovered from personnel for canteen products and services will bring in GST.

The GST clarifications have also laid out a method of filing of refund of unutilized ITC in scenario of export of electrical energy


 “The GST Council meeting has taken numerous selections that would clarify extended-pending litigation-prone issues that would encourage simplicity of doing business in India. One of the most essential clarifications is, perquisite supplied by an employer to an worker in terms of the work settlement would be tax neutral. This would absolutely arrest the ongoing litigations on this issue,” mentioned Rajat Mohan, senior spouse, AMRG Associates.

The Board has also clarified that in case of fake invoicing, no GST can be recovered from the supplier as no source of products or services was concerned, on the other hand, penalty shall be leviable. It further more states that the receiver should not be penalized below various provisions of the GST law for the very same offence, if penalty has now been levied on the recipient beneath a person provision of GST legislation.

“With these clarifications the Federal government has tried out to make sure that the GST authorities do not go outside of the scope of legislation on discovery of such fraudulent instances,” reported Jain of KPMG.

Abhishek A Rastogi, lover, Khaitan & Co explained with the clarification, there are odds that the arrests on this challenge noticeably come down.

With regards to the clarification that GST credits could be applied to fork out for liabilities arising out of departmental audits and assessments, Jain explained that it was a considerably-needed clarification as “some ground stage authorities had been inquiring Businesses to make dollars payments for GST liabilities arising out of the audits and assessments. 

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