As companies are increasingly trying to help their employees in the Covid-19 situation, a matter pertaining to goods and services tax regulation seems to be confusing them the most.
At present, various companies are importing oxygen concentrators for use of their employees and family members at the GST rate of 12 per cent. Typically, the oxygen concentrator will be with the employee for a couple of days or few weeks without any amount being charged, and subsequently, the employee will return the concentrator to the company. But businesses are not sure whether this supply of oxygen concentrators to the employees will get covered as a “deemed supply” under the GST regulation, experts said.
“It may be noted that employees are considered as ‘related persons’ for the purposes of GST legislation. Herein, if a service is provided by the company, to the employees, even without consideration, then as per GST legislation, still, GST is applicable on the open market value of such transactions. But the law cuts across both ways. It is provided that the gifts not exceeding Rs 50,000 in value in a financial year by an employer to an employee shall not be treated as supply of goods or services or both. And in that case, the GST is not applicable. So, given the current situation and dire need of oxygen concentrators, an early clarification will be welcome,” Pritam Mahure, independent chartered accountant, told ETCFO.
This expert believed the Central Board of Indirect Taxes and Customs, or CBIC, should quickly put this tax confusion to rest. He said that oxygen concentrators should not attract tax in the first place and that the government should rather take a lenient approach in times of pandemic. “Death and taxes are certain! Now should we add ‘taxes on death’ too?” Mahure asked.
Mahure suggested the government should classify oxygen concentrators as “zero-rated supply” under GST, saying it will enable businesses to claim input tax refunds. Currently, zero-rated is applicable only for exports or for supplies to special economic zones.
Another tax expert agreed with Mahure. Businesses can argue that giving oxygen concentrators to their employees is like a sort of temporary gift and hence take a stand that such a transaction does not deem to invite GST, the expert, who did not wish to be identified, said. “There is certainly a grey area, and there is no harm in clarifying,” he said. Also, this expert backed the suggestion that the government should classify oxygen concentrators as “zero-rated” supplies. But while he hoped the government should, he does not see it happening.
“FM Nirmala Sitharaman recently defended the GST waiver on vaccines saying the move would rather increase the costs for businesses for they won’t be able to take the input tax credit. While the zero-rated classification could address this issue and enable businesses to claim input tax refunds, it seems very unlikely from the sense the government is giving that it would give in to this clamour of GST waiver for oxygen concentrators,” he said.