• GST applicability for amount received as compensation to maintain confidentiality

Dear Sir,
My client provided financial and accounting services to Private Limited Cos for 11 yrs.
TDS was deducted by cos u/s 194J
Now the company is paying a certain amt to the client as Compensation to maintain confidentiality of the information received during the service.
Will GST be applicable against this amt ?
Against what head the income be charged to tax as per income tax
Asked 1 year ago in GST

Yes GST will apply and unde income tax it will be charged under income from business and profession

Vishrut Rajesh Shah
CA, Ahmedabad
928 Answers
39 Consultations

5.0 on 5.0

Since, TDS has been deducted U/S 194J, it is to be treated as professional services and to be shown under the head Income from business and profession. If it exceeds Rs 20 lakhs limit, GST is applicable  

Vidya Jain
CA, Kolkata
1012 Answers
58 Consultations

4.8 on 5.0

Dear sir,

 

In reference to your query please note that the said compensation seems to be classifiable under Schedule II, clause 5(e) as "agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act;" against which consideration is being received.

 

This transaction therefore constitutes a supply, and is therefore very much exigible to GST.

 

In so far as head of income under Income tax law is concerned, the same being of business nature would be chargeable under the head of PGBP.

 

Please advise in case of any further clarifications.

 

Thanks & Regards,

CA Aditya Dhanuka.

Aditya Dhanuka
CA, Kolkata
83 Answers
5 Consultations

5.0 on 5.0

Hello Dear,

 

If the annual turnover of the client exceeds the threshold limit of Rs. 20 lakhs, then they would be required to register for GST and pay GST on the compensation amount received for maintaining confidentiality.

 

TDS has been deducted under section 194J of the Income Tax Act, then the income received by the client would be treated as income from the provision of professional services, and it should be shown under the head "Income from Business and Profession" in their income tax return.

 

Hope you find the information helpful. You are free to contact me for further discussion.If you could spare two minutes of your time to write a review, It would be really grateful and very happy to read it.

 

Thank you.

Shubham Goyal
https://www.linkedin.com/in/ca-shubham-goyal-7b15491a2/

Shubham Goyal
CA, Delhi
238 Answers
4 Consultations

5.0 on 5.0

- Under GST it is taxable

- Under Income tax it is taxable under the head "Profits & Gains from business or Profession"

 

For detailed discussion you may opt for phone consultation

 

 

Vivek Kumar Arora
CA, Delhi
4863 Answers
1052 Consultations

5.0 on 5.0

Is the company paying an amount just for maintaining confidentiality?

 

This will be income and I think GST and income tax shall be charged.

 

Hope you find the information helpful, if yes do rate if 5 and provide your valuable feedback for my improvement.

Thank you.

Naman Maloo
CA, Jaipur
4280 Answers
98 Consultations

5.0 on 5.0

yes, GST will be applicable on this amount and income will be taxable under business head also

Vishal Khandelwal
CA, JAIPUR
31 Answers

Not rated

Dear Sir,

Hope you are doing well

1.Yes GST will be applicable.

2. Income will be charged under the head Business and Professional.

 

Thanks and Regards

Karishma Chhajer

 

Karishma Chhajer
CA, Jodhpur
2450 Answers
29 Consultations

5.0 on 5.0

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