Dec 03, 2019
Taxing C-suite salaries defies global norm
Recently, there was hue and cry concerning the application of GST on the allocation of head office costs of an organisation to its branch offices in different states. It was reported in the media that the government intended to recover GST on cross charges on account of allocation of common costs, including salaries of CEO, CFO, IT support, administration support, etc. The government quickly issued a press release and clarified that there was no intention to levy GST on salaries of the ‘C’ suite of an organisation as the services provided by an employee to the employer are neither a supply of goods nor a supply of services, and hence, do not attract any GST. So far, so good. However, in the same press release, the government clarified that, following global practice, GST will apply to cross charges for inter-branch supplies of goods and services, which, of course, include the salaries of employees. This appears to confirm the fear of taxpayers rather than allaying it. Further, it stated that the GST so charged by one branch to another is available as an input credit, and hence, is not a cost to business.