Skip to main content

Govt services, office freebies may attract GST

Government services such as issuing of passport, birth certificate and driving licence would attract the goods and services tax (GST), according toarevised draft of the Central GST Bill, introduced in Parliament this week.
This isadeparture from the draft Bill introduced in November, which had included these services in Schedule IV,alist of exemptions.
The latest version specifically states these would qualify as “business”. “GST appears to be applicable on passport services, issue of birth certificates etc unless exempted atalater stage through an exemption notification,” said Punebased chartered accountant and GST trainer Pritam Mahure.
Also, the noncompete amount given by an employer to its outgoing employee is likely to attract the goods and services tax (GST), though clarity on this will emerge only after 31 March when the GST Council meets to frame rules for the new unified tax regime.
Noncompete amount isasum paid to an outgoing employee —based on an agreement with the employer —to ensure that he/she does not joinarival company foraset period of time.
Even now, this amount attracts service tax, saidMSMani of Deloitte.
As such, any amount given to an employee, that is notapart of the contract, might attract GST, he added.
Mani, however, cautions that the GST Bills should not be read in isolation of the rules, which are yet to be framed.

Which items will attractatax will be determined by these rules and the GST Bills, he said.

On taxing of office freebies, the ScheduleI (dealing with supply made without consideration) of the Central GST Bill has provided for an employer to gift to an employee with stuff valued up to Rs.50,000 inafinancial year without attracting GST.

However employers will not be able to claim any input tax credit on the item as it is treated asa “gift”. Any other freebies offered to employees, such as food or cab services will attract GST, experts said.

In another departure from the earlier draft, the definition of “agriculturist” has been amended to cover an individual or any Hindu Undivided Family cultivating land, either through own labour or hired labour, under individual or family supervision.

Earlier, “agriculturist” referred “any person” cultivating land.

The latest draft GST Bill puts the onus of paying GST on the buyer if procured from an unregistered supplier.

The procurer will be required to pay the tax under reverse charge basis.

“There will be an extra burden of compliances on the buyer in relation to identification of procurements from unregistered persons,” said Bipin Sapra, tax partner, EY.

Experts noted that this amendment is likely to haveamassive impact on the compliance complexity for taxpayers and on the competitiveness of unregistered entities.

Aperson liable to pay tax under reverse charge has to issueapayment voucher at the time of making payment to the supplier.

The buyer could claim input tax credit if there is no breakage in the value chain.

In another departure from the draft Bill, the latest version allows businesses to avail input tax credit within six months —as against three months earlier —from the date of issue of invoice.

In the earlier draft GST Bill, specific provision allowed input tax credit on pipelines and telecom towers under the plant and machinery category.

However, this provision is omitted in the latest draft.

Under the latest draft Bill companies have to maintain books of account and records for up to 72 month (six years) from the due date of furnishing of annual return, instead of 60 months (five years) as per the earlier draft.

On March 31, the Council will work out rules on composition, valuation, tax collected at source and transitions.

It has already approved rules on refunds, invoices, returns, payments and registration.

The Council will also take up any changes to the already cleared rules on five issues.

The Council has cleared five Bills —those relating to the Centre, states, union territories and interstate movement of goods and services, besides compensation.

While Parliament is debating four of these, the state GST Bill will have to be cleared by the respective state Assemblies.
Business Standard New Delhi,30th March 2017

Comments

Popular posts from this blog

Household debt up, but India still lags emerging-market economies: RBI

  Although household debt in India is rising, driven by increased borrowing from the financial sector, it remains lower than in other emerging-market economies (EMEs), the Reserve Bank of India (RBI) said in its Financial Stability Report. It added that non-housing retail loans, largely taken for consumption, accounted for 55 per cent of total household debt.As of December 2024, India’s household debt-to-gross domestic product ratio stood at 41.9 per cent. “...Non-housing retail loans, which are mostly used for consumption purposes, formed 54.9 per cent of total household debt as of March 2025 and 25.7 per cent of disposable income as of March 2024. Moreover, the share of these loans has been growing consistently over the years, and their growth has outpaced that of both housing loans and agriculture and business loans,” the RBI said in its report.Housing loans, by contrast, made up 29 per cent of household debt, and their growth has remained steady. However, disaggregated data sho...

External spillovers likely to hit India's financial system: RBI report

  While India’s growth remains insulated from global headwinds mainly due to buoyant domestic demand, the domestic financial system could, however, be impacted by external spillovers, the Reserve Bank of India (RBI) said in its half yearly Financial Stability Report published on Monday.Furthermore, the rising global trade disputes and intensifying geopolitical hostilities could negatively impact the domestic growth outlook and reduce the demand for bank credit, which has decelerated sharply. “Moreover, it could also lead to increased risk aversion among investors and further corrections in domestic equity markets, which despite the recent correction, remain at the high end of their historical range,” the report said.It noted that there is some build-up of stress, primarily in financial markets, on account of global spillovers, which is reflected in the marginal rise in the financial system stress indicator, an indicator of the stress level in the financial system, compared to its p...

Retail inflation cools to a six-year low of 2.82% in May on moderating food prices

  New Delhi: Retail inflation in India cooled to its lowest level in over six years in May, helped by a sharp moderation in food prices, according to provisional government data released Thursday.Consumer Price Index (CPI)-based inflation eased to 2.82% year-on-year, down from 3.16% in April and 4.8% in May last year, data from the Ministry of Statistics and Programme Implementation (MoSPI) showed. This marks the fourth consecutive month of sub-4% inflation, the longest such streak in at least five years.The data comes just days after the Reserve Bank of India’s (RBI) Monetary Policy Committee cut the repo rate by 50 basis points to 5.5%, its third straight cut and a cumulative reduction of 100 basis points since the easing cycle began in February. The move signals a possible pivot from inflation control to supporting growth.Food inflation came in at just 0.99% in May, down from 1.78% in April and a sharp decline from 8.69% a year ago.A Mint poll of 15 economists had projected CPI ...