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    No GST on CXO salaries: Government set to clarify

    Synopsis

    CBEC is set to clarify that common function like HRs should be out of the GST gamut

    MUMBAI: The government is looking to clarify that goods and services tax (GST) should not be applicable on salaries of chief executives sitting in head offices, two people in the know said.

    This comes after the tax department started raising queries on how companies have dealt with this issue. ET had first written on November 14 that some of the top companies headquartered in Pune, Mumbai and New Delhi have started receiving queries from the tax department on cross-charging of CEO and CFO salaries.

    According to a person close to the development the Central Board of Excise and Customs (CBEC), is set to clarify that common function like Human Resources should be out of the GST gamut.

    “The intention of the GST law was never to tax salary and any other interpretation should be avoided as this would lead to prolonged litigation. Salary cannot be under the GST net and there is an urgent need for a clarification around this,” said Rohit Jain, partner, ELP, a law firm.

    The tax department has started questioning top companies and banks if they were passing on some of the common costs like salaries of chief executives to their branch offices.

    The department wants companies to proportionately distribute common costs from head office to branch offices and treat this as a supply. Once this is treated as a supply, 10% of it has to be added to the cost and 18% GST could be levied on the total amount.

    Industry trackers say that ideally this would be a revenue neutral transaction but still impact the cash flows of the company.


    (Catch all the Business News, Breaking News Events and Latest News Updates on The Economic Times.)

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    6 Comments on this Story

    Hat Hum Aap Aur Tum318 days ago
    the tax guys can be crazy and nasty... we already have sinking telcos and now this kind of approach will surely kill investments...
    Hemant Pisat318 days ago
    Absolutely senseless idea of GST sleuths, I think this kind absurdity needs check from the respective ministries, or it will boomerang them.
    Design simplistic laws which are for the benefit of nation and it''s citizens, not for exploring new meanings to make India unpredictable.
    We have already lost to many retrospective challenges posed by laws and lost immensely valuable resources like talent & capital both.
    Sunilkumar Tejwani318 days ago
    it is a retrograde tax and must be taken off from the statute book , being levied without application of mind . a company can not sell some thing to itself , just due to geographical location distance between its H O and other branch offices does not mean it is supplying any taxable services to itself . All the branch offices are part and parcel of the same organisation , the tax department''s definition is flawed , malicious and biased in order to extract unjust tax to meet its targets , this can be challenged in a court of law , and all the costs incurred by people for litigation should be recovered from the errant officials sitting in their cozy offices .
    The Economic Times