Goods and services tax authorities in some states have sent notices to companies seeking information about the remuneration of directors and the tax paid on them.
This comes as only a few companies have started operations following the staggered opening up of the nationwide lockdown to counter the Covid-19 outbreak.
The inquiries come on the heels of conflicting orders passed by the Authority of Advance Ruling in two states on the applicability of GST on the remuneration of directors. The AAR Rajasthan said director remuneration is under the ambit of GST, while the AAR Karnataka ruled it was not.
“The conflicting advance ruling judgments on GST applicability on director’s remuneration has caused doubt in the minds of authorities at the field level, potentially causing unnecessary litigation,” said Bipin Sapra, a partner at .
The tax authorities in states including Chhattisgarh, Uttar Pradesh and Maharashtra have sent out the notices seeking information, said people familiar with the matter.
In some cases, companies have been sent a memorandum, asking them to provide documents detailing the GST paid on the remuneration of directors since July 1, 2017, along with the amounts given to the directors. Companies have been warned of action against them if the information isn’t furnished within a week.
ET has seen a copy of the memorandum sent out on May 12.
The issue has significant ramifications for companies, especially in the services sector, where they need individual registration in each state.
“Even though AAR ruling applies only to applicants who seek clarity on interpretation of laws, still authorities in different tax jurisdictions are taking cognisance of this ruling and issuing notices,” said Rajat Mohan, a senior partner at Associates.
Experts have sought expeditious clarification on the issue. If the GST Council issues a clarification, it will put the matter to rest, Mohan added.
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