The Central Board of Indirect Taxes and Customs has issued a circular regarding the long standing demand of the industry. It states that the facilities and allowances available to the employee are also included in the agreement between the employer and the employee. Therefore, there is no justification for levying GST separately on it.
New Delhi. There is big news for the regular and contract employees. They will not have to pay any GST on the allowances and facilities received by them from the employer. The Central Board of Indirect Taxes and Customs (CBIC) has issued a circular regarding this and clarified.
According to the CBIC, the facilities and allowances provided by the employer to the employee have been kept out of the purview of GST. In such cases, the penalty will be imposed only when the tax is evaded without supplying the product through fake invoices. CBIC has issued this circular after the decisions taken in the GST Council meeting recently.
What will be the effect of the decision
Tax experts say that the circular will prove to be helpful in reducing the demand for tax. Along with this, arrests in cases of fake invoices will also be curbed. Apart from this, the burden of cases on the courts will also be reduced. Till now, there was confusion about the GST on the facilities and allowances available to the employees. For this reason, all the field officers had demanded clarification on the matter.
The field officers had sought clarification regarding the GST on the benefits and allowances provided by the employer to the contractual employees. On this, the CBIC has clarified that neither GST will be charged on the services provided by the employee to the company nor will GST be applicable on the facilities and allowances given by the employer to the employee.
KPMG Tax Partner Abhishek Jain said that this circular of CBIC has fulfilled the long standing demand of the industry . The industry said that the facilities and allowances provided to the employee are part of the agreement between him and the employer. Therefore, GST should not be imposed on them.
In another circular, the CBIC has clarified to the industry and tax officials that demand and penalty will be imposed in the case of fake invoices . There have been many cases where the registered person has generated the tax invoice but not supplied the products or services. Input tax credit was claimed through such fake invoices.
Explaining the meaning of this circular, the tax expert said that no GST will be levied on the supplier for the supply of goods or services, but penalty will be levied in case of fake invoices. Once a penalty has been imposed on the recipient under the GST Act, then GST will not be levied for the same offense again. This will reduce the number of arrests and also reduce the number of tax demands.
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