I am working as a contractor in a factory from last 10 years and now the factory is sold to another company due to no work and our services has been terminated from immediate effect. So we plead to the old management about the problems we will face & hence the management decided to reimburse the retrenchment compensation payable for the employees employed by us for execution of contract service. The management is asking us to give a bill of supply or anything but not a tax invoice under GST, as according to them GST is not chargeable on the reimbursement of retrenchment compensation on closure of work. (reimbursement will be as per actuals). However the company has deducted TDS u/s. 194C on such reimbursements.
My query is: - 1) Whether the management is correct and should i raise a voucher or any other document in lieu of payment receiveable? 2) Whether this amount will form part of my GSTR3B & GSTR1? a) if yes then where to show it? or b) If no then there will be mismatch between my GSTR & Form 26AS & ITR?
30 June 2020
You have to look at the agreement between you and company and ascertain as to who is liable under the contract to bear cost of retrenchment compensation.Your contract will be mostly for providing certain services to the company. If it is your responsibility as an employer then you will raise invoice for reimbursement of retrenchment compensation and in my view GST will be chargeable.
06 July 2020
Thanks for the reply sir. As per agreement under normal situations we are liable to pay the retrenchment compensation to our employees but since it is owing to a situation though peculiar in nature has been originated from the principal employer side & only because of that reason only that they are providing this reimbursement for the first time to all the contractors working in the factory, they are of the view that no GST will be chargeable as it is neither a supply of goods or service and it is out of GST. So, even if we charge GST and raise invoice they are not going to pay for the same. In that case should i raise invoice on my own and deposit GST on my own accord?
CAclubindia
