The Income Tax Act outlines specific situations under Section 2(22)(e) where certain transactions are deemed equivalent to dividends for tax purposes.
Can GST authorities claim GST on such deemed dividends? If so, under what circumstances and case laws please
The GST authorities can claim GST on deemed dividends under certain circumstances. Deemed dividends, as per Section 2(22)(e) of the Income Tax Act, are amounts that are treated as dividends for tax purposes, even if they are not explicitly declared as dividends. GST can be applicable on deemed dividends in the following situations:
1. When the deemed dividend is in the form of goods or services: If the deemed dividend is in the form of goods or services, GST can be levied on the value of those goods or services.
2. When the deemed dividend is a transfer of goods or services:
If the deemed dividend involves a transfer of goods or services, GST can be applicable on the value of the goods or services transferred. Case laws: -
In the case of Commissioner of Central Excise, Chennai vs. M/s. Larsen & Toubro Ltd. (2015), the CESTAT (Customs, Excise and Service Tax Appellate Tribunal) held that deemed dividends are liable to service tax (now replaced by GST).
- In the case of M/s. Hindustan Coca-Cola Beverages Pvt. Ltd. vs. Commissioner of Central Excise & Service Tax (2019), the CESTAT held that GST is applicable on deemed dividends in the form of goods or services.
Please note that GST laws and regulations are subject to change, and specific circumstances may vary.
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