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GST on salaries of top executives? Government to issue a clarification soon

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CEOs, CFOs and top executives of India Inc could be staring at an 18 percent goods and services tax (GST) on their salaries. The government is working on a proposal, but nothing has been finalised yet.

GST on salaries of top executives? Government to issue a clarification soon
Government officials have told CNBC-TV18 that it is mulling to come up with a clarification circular on not to consider 18 percent GST on salaries paid to CEO/CXO, as part of a cross charge.
Government sources have told CNBC-TV18, "The government is working on a circular to soon clarify that no GST will be considered on salaries paid to CEO/CXO. A fresh view has been taken by the government despite the fact that earlier tax authorities had argued that salaries are subject to 18 percent GST. Clarification circular is likely to be issued by the end of November or early December."​
Earlier, the tax department was of a view that if an employee sitting in Mumbai provides services to its company offices in Delhi, he/she should be eligible for GST. But this opened up a pandora's box.
This view was taken at the advance ruling, which was issued in the case of Columbia Asia Hospital wherein authorities had held that cross-charge, head office to branch, would be required and the employee cost will be included in the valuation.
This matter was appealed by Columbia Asia Hospital and appellate authority for advance ruling (AAAR) had held the same view of tax authorities, based on which few regional tax authorities were sending notices on cross-charge to the companies asking their declaration of charging 18 percent GST.
But, now the tax department feels it needs to be clarified. The contours of clarification are being worked upon by the policy wing of the GST department in CBIC.
Experts and stakeholders have been holding discussions on this with the government for quite some time now, citing that such a move could open a pandora's box. "The meaning of 'providing services' has several ramifications and would lead to unnecessary compliance challenges. We are awaiting more clarity on this from the government," says Archit Gupta, Founder and CEO, ClearTax.
Anita Rastogi, partner GST and Indirect tax at PwC says, "The challenge is more on exempt sectors like education, healthcare, electricity where there are no taxable output supplies and hence tax on a cross charge which includes salaries becomes a complete cost. Ideally, a clarification should be issued that salaries should not be a part of a cross charge ."
 

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