GST on employee reimbursements.

Introduction Authority for Advance Ruling, Kerala has recently clarified that recovery of food expenses from the employees for the canteen services provided by company would come under the definition of outward supply defined in section 2(83) of the Act, 2017 and, therefore, would be taxable as a supply of service under GST. The interpretations done by the advance ruling authority have caused apprehensions regarding the taxability of other reimbursements, as such reimbursements may face the GST heat. The ruling, though solely based on the interpretation of the expressions 'business', 'composite supply'& 'consideration', nevertheless, the views taken in this advance ruling are worth discussions. Brief facts of the case M/s. Caltech Polymers Pvt. Ltd., Malappuram (hereinafter referred to as the 'Applicant') was engaged in the manufacture and sale of footwear. The applicant provided…

Rate of GST on restaurant services:

Query: Can restaurants avail input tax credit (‘ITC’) if they charge GST at the rate of 12% (Non – AC) 18% (AC) instead 5% on the sales made by them? Service tax regime: In earlier tax regime abatement of 70% was given on service tax levied on restaurant services by amending the notification No. 1/ 2006-ST, dated 01/03/2006 vide notification No. 34/2011-ST dated 25/04/2011. Therefore, rate of service tax was 4.5% instead of full rate of 15%. The abatement was available provided no Cenvat credit is availed either of inputs or inputs services. This abatement was only optional and not mandatory. Therefore, restaurants were eligible to ITC if restaurants charges full rate of tax (i.e 15%). Analysis: GST council on its 23rd meeting in Guwahati, had slashed the tax rate…

ITAT Bangalore, ruled in favour of Flipkart on the issue of discounts offered by e-commerce company

In a relief to Flipkart the Income Tax Appellate Tribunal rejected the Income-tax department’s argument that, discounts offered by the flipkart should be reclassified as capital expenditure. This ruling is very important from the perspective that, product discounting, advertisement and marketing expenses constitute a major portion of expenses of e-commerce companies/ start-up companies. Click here to view ITAT order

Flipkart VS Revenue : Analysis on Capital vs Revenue Expenditure

Overview: It has been reported that e-commerce giant Flipkart (“Tax Payer”) has lost an appeal against Income-tax department (“Tax Authority”) for issue regarding classification of marketing expenditure and discounts. The First appellate authority (Commissioner of Income-tax) opined that such marketing expenditure and deep discounts cannot be treated as revenue expenditure as it was incurred to build brand value of the Company and thus, should be re-classified as capital expenditure. As per media report Tax Authority is of the view that apart from influencing customer behavior, such high spending by e-commerce operators results in improving the goodwill and thereby creating intangible asset for the Company, and hence, should be reclassified as capital expenditure. In light of the above we have deliberated on some of the key issues related to the topic.…

E-Way bill Key Note

E-Way bill will be implementing from 16-01-2018 in Uttrakhand and from 01-02-2018 in all over India. Let’s we know some important key of E-Way Bill: Q-1> Who is responsible for E-way Bill ? Ans.: The responsibility for E-way Bill is : Ist – The Supplier IInd – The receiver IIIrd – the Registered person if Purchase or sale from a Un-Registered Person/dealer Q-2> what type of supply is cover under E-Way Bill ? Ans.: There is all type of movements of Goods are Cover under E-Way Bill. Including Rejection, Sale Return ,Repair and Maintance and Job Work or material send for Job Work with A Delivery Challan. A approx Value wiii be show on Delivery Challan of Job work and made a E-way Bill for this Challan. Q-3> what Amount…

Supreme Court Judgement on PE

Permanent Establishment (PE) under Article 5 of DTAA: Entire law on concept of “fixed place of business”, “service PE” and “agency PE” explained. The fact that there is close association and dependence between the US company and the Indian companies is irrelevant. The functions performed, assets used and risk assumed, is not a proper and appropriate test to determine whether there is a location PE

No disallowance of expenditure on short deduction of TDS

There have been several instances where the tax authorities disallow the entire expenditure in case of short deduction of withholding tax (‘TDS’) or TDS under a different provision (say, at 2%) while the tax authorities allege that TDS should have been at a different rate (say, 10%). In a big relief, the Mumbai ITAT in the case of Dish TV has ruled that TDS short deduction will not will not trigger the disallowance provisions under the Income-tax Act, 1961. The tax tribunal opined that a disallowance can trigger only when the taxpayer fails to TDS or deposit the same with the authorities. This decision is a welcome relief and should be applied for cases under litigation.