The Central Board of Indirect Taxes and Customs has clarified that perks offered by employers to workers aren’t topic to the Goods and Services Tax (GST), and emphasised that penalties can solely be levied in circumstances involving faux invoices as no items are provided.
Tax consultants anticipate the clarification to deliver a few discount in tax calls for and arrests in faux invoicing circumstances, reining in official overreach that has been contested by way of a number of petitions in courts. The board detailed the clarifications in a sequence of circulars issued on Wednesday, following up on selections taken by the GST Council at its assembly final month.
The confusion on the applicability of GST on worker perquisites has endured for some time as transactions between associated events are topic to the tax even the place no consideration is concerned.
Noting that varied representations had been obtained from area formations of officers looking for clarifications on varied points, together with perquisites offered by an employer to workers as per contractual agreements, the board concluded that neither providers rendered by workers to employers nor perks offered to them by their companies can be topic to GST.
This settles the problem in keeping with the business’s competition that perquisites given as part of the contractual settlement between employer and worker is not going to be liable to GST, famous KPMG tax accomplice Abhishek Jain.
In a separate round, the board responded to pleas from companies in addition to tax officers for readability on demand and penalty provisions below the Central GST legislation for transactions involving faux invoices.
“A number of cases have come to notice where the registered persons are found to be involved in issuing tax invoice, without actual supply of goods or services (“fake invoices”), to be able to allow the recipients of such invoices to avail and utilise enter tax credit score fraudulently,” the board famous earlier than elaborating on its stance in numerous situations.
Summarising the round’s implications, Mr. Jain mentioned: “No GST can be recovered from the supplier as no supply of goods/ services was involved, however, penalty shall be leviable. Further, the recipient should not be penalised under different provisions of the GST law for the same offence, if penalty has already been levied on the recipient under one provision of GST law.”
This, he mentioned, mirrored an try by the federal government to make sure that “GST authorities do not go beyond the scope of law on discovery of such fraudulent instances”.
The new round may result in a discount in arrests and would additionally scale back tax calls for to a really giant extent, opined Abhishek Rastogi, a accomplice at Khaitan and Co., who has been concerned in a number of petitions regarding such circumstances.
Source: www.thehindu.com