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Buyers still confused over new GST math

Buyers still confused over new GST math

With the new fiscal year kicking off, home buyers are a confused lot, with many having a tough time with recently revised Goods and Services Tax (GST) calculations.

The GST Council, in its 34th meeting, had finalized the modalities for the transition to new tax rates on residential flats, providing a flexible option for builders to choose from. According to the new scheme, developers have the option to apply for either the new GST rates — 1 percent for affordable under-construction houses and 5 percent on other houses — or old rates on ongoing projects where construction and actual bookings both began before April 1, 2019.

Real estate firms have time until May 10 to communicate to their respective jurisdictional officers whether they want to continue with the old GST rates with an input tax credit, failing which they will be deemed to have migrated to new tax slabs. Most developers have already expressed their intent to go with the old rates.

“For projects which were launched before April 2019, developers would prefer to stick to the old GST rates. It may not be possible to work on financial matters if the new GST rate is applied on older projects,” Harvinder Sikka, MD, Sikka Group pointed out.

Meanwhile, homebuyers are finding the flexibility offered more in the developers’ interest than theirs.
“It is not clear how much it is going to affect us. The new rates seem lucrative, but we are in the dark as to how much it is going to benefit us if we stick to the new GST rates. I believe that the GST Council should have left the platform open for the buyer to decide which GST rates they want even in the projects launched before April 1, 2019. Right now, the buyer has no choice but to go with whatever the developer decides,” Piyush Ranjan, a homebuyer from Noida said.

Experts had already warned of the potential for confusion.“Customers prefer reduced rates whereas developers might prefer higher rates with an input tax credit. We can expect many more disputes and cases in the anti-profiteering authority in the coming days,” Ankur Dhawan, Chief Investment Officer, PropTiger had predicted post GST ruling.

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Source: The New Indian Express
GST rule change to aid businesses with better cash flow management

GST rule change to aid businesses with better cash flow management

Reversing its February notification, the central board of indirect taxes and customs (CBIC) has provided relief to businesses in terms of using credit in the goods and services tax (GST) system towards tax payment. This will aid businesses with better cash flow management.

“Input tax credit on account of Integrated tax (IGST) shall first be utilized towards payment of integrated tax, and the amount remaining, if any, may be utilized towards the payment of central tax (CGST) and State tax (SGST) or Union territory tax (UTGST), as the case may be, in any order,” the notification said.

Abhishek Jain, tax partner at EY said that this amendment would bring relief to businesses, who have been worried in the last couple of months on account of the possible increased cash outgo for payment of GST liability.

“With this change, businesses could now structure IGST credit utilisation in an order, which does not entail unwarranted cash payments of GST liability where credits are available,” he added.

From February 1, companies were mandated to utilise available Integrated GST (IGST) credit to set off tax liability in the form of IGST, Central GST, and State GST or UTGST in this very order. As a result, they were unable to use IGST credit to set off SGST liability without extinguishing their CGST liabilities.

With this change, businesses still have to set off IGST liability first. But now, the government has allowed businesses to utilise the remainder of IGST credit to pay off either of CGST or SGST liabilities according to their discretion.

Under the old rules which were in operation in February and March, in most of the cases, IGST credit used to get exhausted in IGST and CGST payments in order. CGST credit used to stay in the system un-utilized, and businesses had to make cash payments for SGST.

Now, under the modified rules, the taxpayer can choose to pay off SGST using IGST credit, even if the latter is not used to set off CGST liability. This will improve the efficiency of credit utilisation in the GST system while helping the concerned company with marginally increased working capital.

However, some businessmen said that the rules effective in February and March were not implemented in reality, since the GST Network (GSTN) system did not allow for the same. But nevertheless, this change makes it better for businesses, they said.


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Source: Business-Standard.
Auto industry urges govt to reduce GST on automobiles from 28% to 18%

Auto industry urges govt to reduce GST on automobiles from 28% to 18%

Auto industry has approached the government to cut GST on passenger vehicles and two-wheelers from 28 percent to 18 percent to compensate the sector, which is expected to see a price hike in the range of 10-15 percent with the coming of new emission and safety regulations.

The industry fears that with the increase in prices, the demand for their products would be impacted.

Currently, automobiles attract peak GST rate of 28 percent with additional cess ranging from 1 percent to 15 percent, depending on the length, engine size, and type.

“We want the government to be sensitive to the fact that BS-VI emission introduction (from Apri1, 2020) and other safety regulations will add to the cost. If it adds to the cost it is likely to lead to a slowdown in the demand,” Society of Indian Automobile Manufacturers (SIAM) President Rajan Wadhera told reporters here.

If the demand goes down, government collection of taxes would also go down, he added.

“Therefore, for a win-win situation, we are seeking an 18 percent GST (Goods and Services Tax) in automobiles,” Wadhera said.

A price hike of even 10 percent would impact the sales of the two-wheeler segment, which currently witnesses offtake of over 22 million units annually, he said.

“In PVs also, the prices are going to go up in the range of 10-15 percent due to technology and safety enhancements. There also we need serious considerations by the government so that it is a win-win situation for all,” Wadhera said.

Earlier this year, Maruti Suzuki India Managing Director and CEO Kenichi Ayukawa had sought a reduction in taxes on automobiles in order to create demand and develop the industry.

Major two-wheeler companies like TVS Motor Company, Hero MotoCorp, and Bajaj Auto had also demanded a GST rate cut on two-wheelers.


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Source: Business-Standard.
GST officers seek clarification from companies for mismatch in sales returns, e-way bill data

GST officers seek clarification from companies for mismatch in sales returns, e-way bill data

GST officers have started seeking clarification from companies whose tax payments did not match with the e-way bills generated, as revenue authorities start matching supplies data to check tax evasion, sources said.

Touted as an anti-evasion measure, e-way bill system was rolled out on April 1, 2018, for moving goods worth over Rs 50,000 from one state to another. The same for intra or within the state movement was rolled out in a phased manner from April 15, 2018.

Following this, it has come to the notice of tax officers that some transporters are doing multiple trips by generating only a single e-way bill or not reflecting e-way bill invoices while filing sales return. It has also come to the notice that certain businesses are not generating e-way bills even as supplies are being made.

Goods and Services Tax Network (GSTN), the company which handles the technology backbone for GST, has started sharing details of e-way bills vis-a-vis taxes paid to help tax officers identify any discrepancy, sources added.

In one of the letters issued by Ghaziabad GST commissionerate, a taxpayer has been asked to provide “clarification” within three days on the difference between taxes paid and the liability which the tax officer has ascertained after analyzing sales return GSTR-3B and e-way bill data for the period October 2018 and January 2019.

Matching of invoices of e-way bills with the sales shown in sales returns helps taxmen in assessing whether the supplies have been accurately shown in the returns and GST paid on the same.

GSTN has also provided the facility to businesses to include details of e-way bills generated while filing the final monthly sales return under GSTR-1 to avoid double data entry.

The government is banking on anti-evasion measures to meet its GST collection target for the current fiscal.

For fiscal 2019-20, the government proposes to collect Rs 6.10 lakh crore from Central GST and Rs 1.01 lakh crore as compensation cess. The Integrated GST balance has been pegged at Rs 50,000 crore.

AMRG & Associates Partner Rajat Mohan said tax officers have started using the pile of GSTN data retrieved through return filings and e-way bill mechanics to carve out a summary reconciliation statement of estimated tax liability, compelling businesses to justify the outward tax liabilities in a comprehensive manner.

“Tax authorities would be at fault if they presume that reconciliation difference is due to tax evasion only. There be other reasons for this difference like clerical errors, cut off supplies and pre-delivery expiry of e-way bills,” Mohan added.

To further streamline the e-way bill system, GSTN is planning some changes, including auto calculation of route distance based on PIN code and blocking of generation of multiple e-way bills on one invoice/document.

The matching of e-way bill data with that of tax payment is in addition to analysis being done by GSTN by matching taxes paid in summary sales return GSTR-3B and final returns GSTR-1.

Also, businesses whose GSTR-1 did not match with GSTR-2A, which is a purchase return auto-generated by a system from the seller’s return, have been flagged by GSTN systems.

Based on this, last year tax officers sent scrutiny notices to taxpayers seeking an explanation for the reason for the discrepancies

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Source: Money Control.
Realtors have time till May 10 to opt for old GST rates

Realtors have time till May 10 to opt for old GST rates

Real estate firms have time till May 10 to communicate to their respective jurisdictional officers whether they want to continue with the old GST rates with the input tax credit, failing which they will be deemed to have migrated to new tax rates. The GST Council had given the option to real estate companies to either opt for old rates of 12 per cent (for residential) and 8 per cent (affordable housing) with input tax credit (ITC) benefits or the new tax rates of 5 per cent for residential units and 1 per cent for affordable housing without the benefit of adjusting the credit on inputs used during construction.

The Central Board of Indirect Taxes and Customs (CBIC) has issued a notification giving real estate companies a one-time option to choose either of the tax rates.

“Provided that in case of an ongoing project, the registered person shall exercise one time option … to pay central tax on construction of apartments in a project at the rates as specified …. by the 10th of May, 2019,” the CBIC said.

In case, realtors do not exercise the option, they will be covered under the lower tax rate of 5 percent and 1 percent with effect from April 1, 2019, and will not be entitled to avail tax credit on inputs.

Meanwhile, in a separate notification, the CBIC has asked the real estate companies that will be migrating to the new rates to prepare their books of accounts with regard to ITC and repay the over-used credit, if any, to the government in 24 installments.

Explaining the provision, AMRG & Associates Partner Rajat Mohan said builders opting for a lower rate of taxes with effect from April 1 would have to recalculate eligible tax credit since the inception of GST based on the proportion of residential to commercial carpet area, sold to unsold units and invoiced to a un-invoiced amount.

“Based on the factual data if tax credit has been availed beyond permissible proportion, then such excess needs to paid back to tax authorities. In quite a few cases, such tax payment would be magnanimous, especially where the project is nearing completion, but unsold units lying in inventory are high. This will have a high tax risk on real estate sector and many may experience the worst cash flow position since the inception of GST,” Mohan said.

Further, the CBIC has also asked builders to maintain project wise account of inward supplies from a registered and unregistered supplier.

“GST mandated a state-wise registration. However, now taxpayers in the real estate sector are liable to produce project-wise break-up of procurements and outward supplies in order to re-calculate admissible tax credits. This will burden a taxpayer with multiple tax records to be updated on a regular basis, moving away from ‘Ease of doing business‘,” Mohan said.


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Source: Times of India
Arun Jaitley favours GST council-like structure for healthcare, agriculture

Arun Jaitley favours GST council-like structure for healthcare, agriculture

Finance minister Arun Jaitley argued a case for setting up GST Council-like federal institutions to promote healthcare, rural development and agriculture sectors to allow the Centre and states to supplement each other’s efforts instead of competing.

In the 10th and concluding part of his ‘Agenda 2019’ series titled ‘Why Agriculture, Rural Development and Healthcare Require a GST Council-Type Structure?’ Jaitley urges pooling of resources to avoid overlap and duplication.

“The question, thus, is why can’t this experiment be replicated elsewhere?” Jaitley asked as he flagged these areas where GST Council-type of cooperation was possible.

“The GST Council has become India’s first federal institution. Its working is a role model in other areas where federal institutions are needed in India,” Jaitley said, pointing out that it displays the maturity of India’s democracy and politics.

The GST Council is an “excellent federal institution”, which in its 34 meetings has decided thousands of issues with consensus leading to benefits to traders and people and developing ‘New India’, he said. The GST Council is chaired by the finance minister and comprises finance ministers of all states.

“When larger national interest requires, decision-makers can rise to the occasion. It negates the popular impression that politicians of different shades of opinions will always be divided on party lines,” he said, making a case for the model to be used elsewhere as well.

“Agriculture, rural development and healthcare are areas where, in the larger national interest, the GST Council experience needs to be replicated,” he said, adding that in these areas both central and state governments are spending a lot of money.

“Should they not be pooling their resources and ensure that no overlap or duplication takes place and that the interest of the largest number is protected and enhanced?” he said, questioning why elected governments must compete.

He pointed to the case of West Bengal, Delhi, and Odisha, which have refused to implement Ayushman Bharat where every poor family gets up to Rs 5 lakh of hospitalisation support annually. Similarly, Rajasthan, Madhya Pradesh, Delhi, Karnataka and West Bengal are non-cooperative in PM Kisan scheme where small and marginal farmers get Rs 6,000 income support annually.

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Source: Economic Times
GST Council to issue new tax norms for real estate

GST Council to issue new tax norms for real estate

Federal indirect tax body the Goods and Services Tax (GST) Council will on Tuesday announce new rules on how far builders can make use of credit for taxes paid on raw materials and services in settling their final tax liability as the sector moves to a new tax regime from 1 April.

The Council has designed a formula to allow builders to take advantage of the tax credits on their books as best as GST principles will allow. Policymakers want to give relief to builders to the extent possible as unused credit will either push up the cost of the property or impact the bottom line of builders, explained a government official, who asked not to be named.

The GST Council had decided on 24 February to lower the tax rate on under-construction residential properties from an effective 12% to 5% and on under-construction affordable houses from an effective 8% to 1%. The new tax structure does not allow builders to use credits for taxes paid on raw materials to be used for settling part of their final tax liability.

The new rules to be announced on Tuesday will specify under what circumstances sale transactions initiated in the current tax regime but concluded after 1 April will be eligible for credits on taxes paid on raw materials and services. It will clarify on the tax rates applicable and the availability of tax credits in a host of scenarios including where the builder has paid taxes on raw materials but has either not started construction or has only half-completed the construction. These rules were necessitated as home buying is often a lengthy affair while the new tax rate kicks in from a specific date. The move is significant considering that many builders are grappling with project delays which are likely to continue beyond 1 April.

“We had extensive discussions on the impact of the new tax regime on the real estate industry. The new formula for utilization of credit during the transition period takes into account the fact that unlike other industries, real estate projects have a long gestation time,” the official quoted above said on condition of anonymity.

For builders, the change in the tax regime is a challenging situation. Currently, an unutilized tax credit is an asset on the builder’s books. The moment that becomes unusable, it becomes an expense and has to be shown accordingly, explained Ved Jain, former president of the Institute of Chartered Accountants of India (ICAI). Disallowed tax credits could thus affect builders’ bottom line and even valuation.

Also, under property sale deals, customers are liable to pay the property price plus GST at the applicable rate. In the case where houses were booked earlier but the sale is to be completed after 1 April, buyers will insist on paying only 5% GST, while developers may prefer to utilize the input tax credit available to them and charge the higher tax rate prevailing now.

“Rules on a transition to the new tax regime should address such scenarios to prevent civil disputes,” said Jain. “It is essential to frame modalities for the rate reductions in the real estate sector in a manner that is beneficial to both the real estate business and the consumers with clarity on transition provisions,” said M.S. Mani, Partner, Deloitte India.


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Source: live mint
Realtors seek clarity on GST exemption on development rights 

Realtors seek clarity on GST exemption on development rights 

Mumbai: Realty developers are seeking clarity on recent exemption offered from the goods & services tax (GST) levied on development rights, including transferable development rights (TDRs), development rights certificates (DRCs) and joint development agreements (JDAs).

Realtors’ body, the National Real Estate Development Council (NAREDCO), has written to the Ministry of Housing and Urban Affairs seeking clarity on this.

Last Sunday, the GST Council proposed that intermediate tax on development rights will be exempted only for such residential projects on which GST is payable.

The government decided to more than halve the GST rates for under-construction projects to 5% from 12%. The GST Council removed the input tax credit, while GST on affordable housing was reduced to a marginal 1% along with expanding the definition of such homes. Ready properties that have received occupancy certificate (OC) do not attract GST.

“What if some units are being sold after the project is completed? Being a completed project that has already received an occupation certificate, it will not attract GST. Will the JDA or TDRs used in this project still attract intermediate tax? We need to get clarity on this,” said Niranjan Hiranandani, national president, NARDECO.

The ministry has already announced that details of this scheme will be worked out by an officers committee and will be approved by the GST Council in a meeting to be called specifically for this purpose soon.

As the details of the scheme are yet to be worked out by an officers’ committee, the developers’ body has sought to make a representation to avoid confusions or litigations later on. NAREDCO is of the view that the condition to be fulfilled to receive the tax exemption — “only for such residential projects on which GST is payable” — may lead to litigations.

In its letter to the ministry earlier this week, the developers’ body has cited instances that can lead to confusion and litigations. These examples include that of a residential project with convenience and retail shops, smart and integrated townships tagged as mixed-use development, and sale of residential units post completion of the project.

The NAREDCO representation is that the wording should be: “Tax on development rights, such as TDR/ JDA, long-term lease (premium), FSI shall be exempted”. Effectively, there should be no levying of ‘intermediate tax’ and the exemption should not be restricted to just ‘residential property’, but to all segments and types of property including commercial.

XaTTaX: Cloud and On-Premises Based GST Filing Software For India

Source : economictimes.indiatimes.com
Taxpayers Alert! Check out these 8 new features at GST Portal: Here’s how easy GSTR filing gets for you

Taxpayers Alert! Check out these 8 new features at GST Portal: Here’s how easy GSTR filing gets for you

TDS/TCS Credit available for utilization

A new window has been enabled for claiming TDS/TCS credits. The taxpayer has the option of accepting or rejecting the TDS/TCS credits available and filing their return, after which the credits get transferred to the cash ledger and can be used for making GST payments.

This facility helps taxpayers easily identify such credits and take action accordingly.

E-way bill data can be imported for GSTR-1

The E-way bill (EWB) and the GST portal has now been integrated. The same gets automatically imported for the B2B and B2C (large) invoices sections as well as the HSN-wise-summary of outward supplies section. Users only need to verify the data and proceed.

This has definitely saved both time and effort for a business person, as it avoids unnecessary data-entry. However, many businesses were performing this sort of reconciliation themselves using smart tools to ensure accuracy of data.

List of preferred banks available for making payments

A taxpayer can choose from a list of 6 preferred banks that will be auto-saved at the time of making payments. If he makes payment through a 7th bank account, the same will get added, and the least used bank account will get removed. He has the option to delete the bank accounts at any point in time.

With this feature in place,the taxpayer need not enter bank details every time, as he can simply select a bank with the click of a button and proceed to make payment.

Refund applications can be filed monthly for quarterly filers

There is good news for taxpayers opting to make payments on a quarterly basis. They now do not have to wait for the quarterly filing of refund applications, as the same can be done monthly. However, a prerequisite for the same would be to ensure that GSTR-1 for the quarter has been filed.

This will definitely help mobilise the working capital flows of business as there is no longer a need to wait till the end of a quarter to apply for a refund.

Appeals can be filed online and system-generated acknowledgment will be issued

A taxpayer can file an appeal against an order passed by an appellate authority, or against an advanced ruling by an appellate authority on the GST portal. He even has the option to file an application with the appellate authority in the case of rectification of a mistake in order passed.

In the event of an appellate authority failing to issue a final acknowledgment within the stipulated time, then a system generated final acknowledgment will be issued with the remark “subject to validation of certified copies”. This has simplified the process of filing appeals and also helps to track the status of the same.

Composition taxpayers can reply to SCN online for compulsory withdrawal

For composition taxpayers, there is a simpler way to reply to show cause notices(SCN) now. This is in the case of a show cause notice being issued for compulsory withdrawal from the composition scheme, and if proceedings are initiated against the composition taxpayer, he now has the option to reply to show cause notices on the portal.

Bank account details not mandatory at the time of registration

Declaring bank account details are now optional at the time of registration for Normal, OIDAR and NRTP taxpayers. Previously, this was a mandatory requirement. The bank account details can be updated at a later date, which will be at the time of the first login.

Hence, a GST registration number can be obtained without the same. New businesses who are in the process of obtaining bank accounts can simultaneously proceed with GST registration, thus saving time.

Claiming of ITC and amendment of B2B invoices of 17-18 are re-opened up till March 2019

Users can now amend B2B invoices of FY 2017-18. The facility to amend the GSTR-1 details of FY 17-18 was closed on filing the September 2018 return. The same has been made available while filing returns for the months of January to March 2019. The input tax credit of FY 2017-18 that was omitted and hence unclaimed up till September 2018 can be claimed now up to March 2019 as well. This was a much-needed remedy for taxpayers who made errors reporting any invoice in the past or previously missed out claiming genuine credit.

While there are updates being rolled out from time-to-time, users are still hoping to see a smooth system that is completely online and indefectible. In the future, users can look forward to more new updates that would familiarise taxpayers with the new return system that is likely to be introduced by July 2019

 

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Source: zeebiz.com
Guest house for employees a perk, cannot claim GST input credit rules Odisha AAAR

Guest house for employees a perk, cannot claim GST input credit rules Odisha AAAR

A new ruling by the Appellate Authority of Advance Ruling (AAAR) can open a Pandora’s Box when it comes to an employer, employee relationship and the nature of perquisites being provided.

The case came up when the National Aluminum Company Limited (NACL), a manufacturer of aluminum metal, decided to appeal against the ruling pronounced by the Odisha Authority for Advance Ruling.

NACL has townships at Angul, Damonjodi, and Bhubaneswar for its employees and also runs hospitals at Damanjodi and Angul for its employees along with guest houses for touring employees and guests. The bone of contention was that NACL wanted to claim input credit in maintaining hospitals, residential colonies and guest house and also the upkeep of garden in the residential colonies, mine and office premises. When the case went to the Odisha Authority for Advance Ruling (AAR), input credit was disallowed for some activities.

According to the AAR, inward supplies received by way of management, repair, renovation for furnishing the residential colony does not qualify for the input tax credit as residential accommodation is an exempted supply.

The input tax credit is also not admissible in respect of services and goods procured for maintenance of hospitals and pharmacy outlet as such services, being nil rated also fall under exempt supplies. Similarly, the service availed in relation to plant & garden in the residential colony will also not qualify for input tax credit

NACL was, however, entitled to input tax credit of the tax paid on inward supply of input and input service for maintenance of the guest house, transit house & training hostel. Also, services availed in relation to plantation and gardening within the plant area including mining area and the premises of other business establishments will also qualify for input tax credit.

Following the order by the AAR, the Commissioner (CX &GST, Bhubaneswar) interestingly also preferred to appeal against the order, challenging that the order is not legal and proper to the extent it has allowed credit for maintenance of guest house, hostel and service utilized for plantation and gardening within the plant area, administrative building.

Justifications by NACL in its appeal:
The AAR has wrongly held that the company’s activities of management, maintenance or repair of the townships are not for or in relation to its core business while denying the credit of the tax paid on the goods and services used for management, maintenance or repair of the township of its employees, and horticulture in township. NACL said it undertakes such activities for its business in the course or furtherance of business and, therefore, it is entitled to take credit of tax paid on such services.
The infrastructure of township at Angul, Damanjodi and Bhubaneswar are necessary to run large scale business of manufacturing, where thousands of employees are working.
In terms of GST laws, not only the manufacturing activity but any incidental or ancillary activities thereof are also covered within the expression “business” in the GST laws. Maintenance of various facilities in residential townships is integrally related to the business activities of the appellant and not a welfare activity undertaken by the appellant.

Contentions by the Commissioner:
Residential colonies are built for the welfare and benefit of the employees and extending any sort of benefit to the employees cannot be treated as something used or intended to be used in the course or furtherance of business
Similarly, the ruling of the AAR that utility of service provided through plantation & gardening within the plant area including mining area will be eligible for credit is also not legal and proper as it does not do not pass the legal test, which is used or intended to be used in course or furtherance of business.

Final ruling of the Appellate Authority of Advance Ruling (AAAR):
After considering the legal provisions and facts of the case, the AAAR held as follows:
The ruling of the AAR that inward supplies received by NACL for management, repair, renovation, alteration or maintenance service or goods received for furnishing the residential colony will not qualify for input tax credit is found to be correct.
Expenditure incurred by NACL towards construction, reconstruction, renovation, additions or alterations or repairs to the residential colony including plantation and gardening is not eligible for input tax benefit as it is nothing but a perquisite. “This ruling is likely to open the debate on whether an expenditure incurred by employee qualifies as a perquisite or a business expense incurred during the course or furtherance of business. This is because credit for former is not available while for later it may be available. It is time to re-look at the employment contracts,” says Harpreet Singh, Partner, KPMG India.
However, the AAAR held that the ruling of the AAR entitling NACL to input tax credit of the tax paid on inward supply of input and input services for maintenance of guest house transit house and trainee hostel is found to be not correct as the same is also a perquisite in favour of the employees.
The AAAR, however, allowed credit to NACL on services availed in relation to plantation and gardening within the plant area including mining area and the premises of other business establishments citing that it is a business necessity for controlling pollution as well as atmospheric temperature.

The same is also mandated in various laws under which the Applicant conducts its business such as the Forest Conservation Act, the Environment Protection Act, etc. Therefore, such activities are integral to the business activity and hence can be treated as activities in course or furtherance of its business.

“This is a positive order for the industry as, while allowing input credit of services availed in relation to plantation and gardening within factory premises, the authorities have not only considered whether such expenditure was warranted by any statutory law, but also taken cognizance of the expenditure being a business necessity for controlling pollution, temperature and preventing soil erosion,” added said Singh.
There is a thin line between perquisite and business expenditure and the ruling does not do anything to reduce confusion. For businesses, it will be a setback that facilities like guesthouse that carry certain expenditure, does not qualify for input credit. In considering maintaining and running a guest house as a cost-to-company, the AAAR has stated it in not in furtherance of the business nor is it integral part of the business. The debate on employee benefit and business expenditure is likely to continue.

 

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Source : economictimes.indiatimes.com