Bonus attracts gst, Goods and Services Tax - GST

[Shan S]

Is gst applicable for a bonus received from service rendered, which is not a part of invoice?

if so, invoice must be issued for the bonus amount like normal invoice or what is the category it would fit in?

 

Posts / Replies

[Sadanand Bulbule]

Refer the following CBIC Circulars:

Circular No.172/04/2022-GST dated 06/07/2022

Circular No.178/10/2022-GST dated 03/08/2022

[YAGAY andSUN]

Yes, GST could be applicable on a bonus received for services rendered, even if it is not part of the original invoice. The applicability of GST on such payments depends on the nature of the bonus and how it is related to the supply of services.

GST on Bonus Received

A bonus received for services rendered is treated as consideration for the supply of services under GST. Even if the bonus is paid separately and not included in the original invoice, it can still be subject to GST because it is an additional payment for the same supply (the services rendered). This is similar to any other payment made in relation to the services, as GST is applicable on the total consideration for the service.

Invoicing for the Bonus

According to the CBIC Circulars, here’s how the bonus would be treated:

1. Circular No. 172/04/2022-GST dated 06/07/2022: This circular clarifies that any additional payment or incentive (such as a bonus) provided by the recipient of the service to the service provider, which is related to the original service contract, is also subject to GST. The bonus, being an additional payment for the service, forms part of the "consideration" under GST.
2. Circular No. 178/10/2022-GST dated 03/08/2022: This circular further reinforces the idea that such payments (like a bonus) should be treated as part of the overall consideration and subject to GST. The bonus is not excluded from the definition of "consideration," meaning that it must be treated as part of the supply.

How to Invoice the Bonus

If the bonus is an additional payment for services rendered, it should be invoiced separately. Here’s how it can be done:

• Issuing an Invoice: The service provider should issue a separate invoice for the bonus amount if the bonus is paid later and not included in the original invoice. The invoice should mention the bonus as additional consideration for the same supply of services.
• GST Category: The bonus should be categorized under the same GST classification as the original service. If the original service is taxable, the bonus amount will be taxed at the same rate as the original service.

Conclusion

GST is applicable on bonuses received for services rendered, even if not part of the original invoice. The bonus must be treated as part of the total consideration for the service, and a separate invoice should be issued for the bonus amount. The GST treatment will follow the same rate and classification as the original service provided.