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Esops by MNCs to Indian Staff Won’t Attract GST

Multinational companies offering Employee Stock Option plans to their employees in the country or loans to Indian subsidiaries will not be required to cough up goods and services tax.

The Central Board of Indirect Taxes and Customs Thursday Issued 16 circulars, bringing in to effect decisions taken by the GST Council on Saturday aimed at giving relief to companies across multiple sectors, including airlines, shipping, banking ecommerce. Fast moving Consumer Goods (FMCG) and insurance.

Employee Stock Purchase Plan (ESPP), Employee Stock Option Plan (ESOP) or Restricted Stock Unit (RSU) offered without any additional charges will not attract GST. Loans provided by foreign companies to their Indian subsidiaries will not attract any GST, if there is no processing or administrative fee Involved.

The apex indirect taxes body said services provided by foreign companies to their Indian subsidiaries will be considered at open market value if the Indian subsidiary receives full Input Tax Credit and said that the year for calculating the time limit to avail of ITC will be the year of issuance of invoices under the Reverse Charge Mechanism (RCM).

The board also said that while the GST council has put a monetary limit for the revenue to file court cases the limits do not apply when a GST act or provision has been held unconstitutional in cases of valuation and classification of goods or services refunds and when adverse comments or costs have been imposed against the government or its officers. “While many clarifications would have wider ramifications, insurance, telecom, e-commerce and FMCG would particularly be benefited,” Pratik Jain, partner PwC India said. In case of import of services by a registered person in India from a related person located outside India, the board said that tax must be paid by the registered person in India under the reverse charge mechanism and the company located in India is required to issue a self-invoice and pay tax on a reverse charge basis. Suppliers giving post sale discounts through credit notes will have to ensure that the client gives an undertaking or a certificate from chartered accountant stating that the ITC availed on the discount value had been reversed. When goods are supplied to an unregistered person and the billing address differs from the delivery address, the place of supply is the location as per the delivery address recorded in the invoice and the supplier should record the delivery ad dress as the recipient’s address on the invoice when the billing and delivery addresses differ.

“It is apparent that the representations and the requests of various industries including automotive industry, insurance sectors, construction companies, Banking Sectors have been heard and the drawn-out wars have been finished,” Shivam Mehta, Executive Partner at Lakshmikumaran & Sridharan Attorneys said. For supplies received from un-registered suppliers, “the relevant financial year for calculation of time limit for availment of ITC will be the financial year in which the recipient has issued the invoice, and if the invoice is issued after the time of supply, it would attract interest on such delayed tax payment.

“The initiative by the CBIC aims to reduce the unnecessary litigation and safeguard the interest of honest taxpayers,” Saurabh Agarwal, Tax partner EY.

S-ET Image Source: Google

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