GST: Non Compete Fees Under GST in Hindi
GST: Non Compete Fees Under GST in Hindi
1. Non-compete agreements are entered during acquisitions that restrict the seller from starting a new venture for some time or poaching employees and customers under GST.
E.g.: Employer is given an amount to not to join competitor company.
2. Issue: Department is saying that non-compete fees is taxable and tax is payable @18%.
3. Different views expressed under GST:
As per taxman, it is service provided by seller of business to buyer of business.
ICAI in its background material has cited ‘non-compete agreement for a fee’ as an example of sub para (e) para 5 of schedule II.
4. As per Schedule II para 5 sub para (e), “agreeing to the obligation to refrain from an act or a situation, or to do an act”, it can be confirmed as deemed service but there exists difference of opinion.
5. Registration requirement can also arise in such a case if amount paid as non-compete fees exceeds Rs. 20 Lakh.
6. Though fate of these agreements shall be known later but drafting of agreement is the key. The Non-compete agreements should be designed very carefully.
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