Gifts upto a value of Rs 50,000/- per year by an employer to his employee are outside the ambit of GST. The Press Release issued on 10th of July by the Finance Ministry clarifying so, also states that service of membership of a club, health and fitness centre provided free of charge to all the employees by the employer will not be liable to GST, provided appropriate tax is paid by the employer at time of their procurement.

It has also been clarified that provision of free housing to the employees, provided in terms of contractual agreement between employer and employee, would not be liable to GST if the same is part and parcel of cost-to-company.

In respect of gifts, the press release notes that though word ‘gift’ is not defined in the GST law,

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“In common parlance, gift is made without consideration, is voluntary in nature and is made occasionally. It cannot be demanded as a matter of right by the employee and the employee cannot move a court of law for obtaining a gift.”

It may however be noted that gifts of value more than Rs 50,000/- made without any consideration would be liable to GST, when made in the course or furtherance of business.

On the question of taxation of perquisites the Finance Ministry is of the view that since services by employee to the employer in the course of employment is outside the scope of GST, supply by employer to employee in terms of contractual agreement entered into between them, will not be subjected to GST.

However, as far as the employee is concerned the income tax threshold is Rs 5,000, beyond which she/ he is liable to pay tax on the gift received from the employer, whether in cash or kind

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2 responses to “Gifts and Perquisites by employer to Employee when not liable to GST”

  1. Shgaun says:

    However, as far as the employee is concerned the income tax threshold is Rs 5,000, beyond which she/ he is liable to pay tax on the gift received from the employer, whether in cash or kind.. can u please source for this ?

    • cmagauravdutta says:

      Hi Shgaun sorry for late reply.
      AS per income Tax Circular No. 15/2001 Dated December 12 2001
      Value of any gift received by the employee shall be determined as the sum equal to the amount of such gift. the perquisite is taxable. however if the value of such gift is less than Rs 5000 in the aggregate during the previous financial year the value of perquisite shall be taken as nil.
      Note: gifts made in cash or convertible in to money (like gift cheques) are not exempt.

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