GST to keep an eye on your perks outside CTC

Goods and Services Tax (GST), India’s biggest tax reform since independence, which is likely to be implemented from July 1 this year, would be keeping an eye on the perks employees get outside their CTC.

If the company supplies free goods or services to employees exceeding the predetermined sum, or if employees avail companies’ assets, like cars, for personal use, GST would be applicable.

Also read: Free, unlimited snacks are becoming a common office perk - here's how companies like Facebook and LinkedIn feed their employees

Other than this, input tax credit, which is the tax paid on procurements that can be set off against the tax liability, will not be available if various facilities, including life and health insurance, are supplied to the employees.

Given below are the explained provisions contained in the GST bills, as procured from tax experts by TOI.

Supply made without consideration (to employees)
Supply of goods or services to a related party (including employees) without consideration, when made in the course of furtherance of business, is taxable under GST.

However, there is an exception that has been made in the Goods and Services Tax (GST) Bill. As per Schedule 1, "gifts" not exceeding Rs 50,000 in value given per employee in one financial year shall not be treated as supply of goods and services.

Use of assets
As per clause 4(b) of schedule II, if goods held for the purpose of the business are put to private use, whether or not for a consideration, it would be liable for a GST levy. However, based on past judicial decisions, one can argue that GST would be payable only if it is the proprietor himself who uses business asset for personal purposes. How the authorities interpret this provision remains to be seen.

Denial of input tax credit
The final bill has a list of services for which input tax credit will not be available, including free or subsidised food and beverages at the workplace, sponsorship of club or fitness centres membership, cab facilities, group life and health insurance etc. However, it will not be denied in cases of services that the government notifies, services that the employer is obligated under law to provide.

India Inc is waiting for the announcement of facilities for which they could claim an input tax credit.

(Image source: Envirotech Office Systems)