Sec 28(iv)
This query is : Resolved
13 May 2020
Free of cost hospitality Service given to statutory Auditor by Hotel (Client), Tax effect under income tax?
14 May 2020
You can claim the same as Business Expenses and debit the same in Profit and Loss Account for the year.
25 May 2020
The situation is quite peculiar in the common parlance. Presently many Hotels are not paying GST in case of room accommodation & other services provided to Directors / Company Executives / Auditors on the value of their stay in hotels.
For understanding the tax incidence on this transaction it is pertinent to understand the concept of ‘related person ‘ in GST. As per the provisions Directors & Company Executives are deemed as “related persons” .
As per Schedule I of CGST Act / SGST Act, Supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business, shall be treated as Supply even if it is made without consideration.
Hence, in the given case, if supply is made to Directors / Company’s executive without any consideration, then it will be in the category of supply made to “related persons”, hence GST will be payable on such supply & accordingly as per valuation rules, open market value of such supply shall be the value of supply made to related persons.
In the case of supply made to Auditor without any consideration, the same will not fall in the category of “related persons”, hence GST will not be payable on value of such supply. However the input tax credit availed in relation to such supply has to be reversed in accordance with Section 17(5) & Rule 42.
For understanding the tax incidence on this transaction it is pertinent to understand the concept of ‘related person ‘ in GST. As per the provisions Directors & Company Executives are deemed as “related persons” .
As per Schedule I of CGST Act / SGST Act, Supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business, shall be treated as Supply even if it is made without consideration.
Hence, in the given case, if supply is made to Directors / Company’s executive without any consideration, then it will be in the category of supply made to “related persons”, hence GST will be payable on such supply & accordingly as per valuation rules, open market value of such supply shall be the value of supply made to related persons.
In the case of supply made to Auditor without any consideration, the same will not fall in the category of “related persons”, hence GST will not be payable on value of such supply. However the input tax credit availed in relation to such supply has to be reversed in accordance with Section 17(5) & Rule 42.
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