Article made an attempt to Clarity – GST Impact On Employees/ Recoveries From Employees With Advance Rulings.
Employee related transactions are bifurcated in two parts – (i) Services provided by employer to employee and (ii) Services provided by employee to employer.
|Sr. No.||Particulars||Legal Provisions and Taxability|
|1.||SERVICES PROVIDED BY EMPLOYER TO EMPLOYEE
||1. Short Notice pay recovery
Decision of Madras High Court – (GE T & D INDIA LIMITED Vs DEPUTY COMMISSIONER OF CENTRAL EXCISE, CHENNAI)
Author’s view- This issue is litigative. However, above mentioned decision is equally relevant under GST regime as well which contains similar provisions.
2. Medical insurance facility/ Recovery of medical insurance premium from employees
Order – Recovery of parent’s health insurance expenses from employees does not amount to supply of service under GST law. Therefore, GST shall not be applicable on such recovery by employers.
Similar advance Ruling of Uttar Pradesh- ION TRADING INDIA (P) LTD.
Order -The recovery of premium amount from employee and subsequent deposit it with insurance Company cannot be treated as supply of service in the course of furtherance of business. Therefore, GST shall not be applicable on such recovery by employers.
Author’s view – This ruling is equally relevant if recovery is related to medical insurance reimbursement of employee and spouse of employee.
3. Food (lunch/ Dinner) Canteen services (Recovery of food charges from employees)
Order – The supply of food items to the employees for consideration in the canteen run by the appellant company would come under the definition of ‘supply’ and would be taxable under GST.
4. Recovery of salary already paid
Author’s view- This ruling is equally relevant under GST regime as well which contains similar provisions.
5. Beverages, Shuttl service, Cab, Health club/ Gym, Creche, Car parking facility, T-shirts, Diaries, Books, Journals, subscriptions, Group mediclaim/ Personal accident insurance taken for all employees, Health checkup facility
As per press release issued by CBIC on 10 July 2017, If services are provided free of charge to all the employees by the employer then the same will not be subjected to GST, provided appropriate GST was paid when procured by the employer.
6. Sale of used assets like laptop/ desktop to employees
Decision of Supreme court – State of Tamil Nadu V Binny Ltd. (1982) 49 STC 17 (SC)
Sales effected in stores maintained by Company as a welfare measure for employees was held as incidental to main business and hence taxable.
Author’s view- This ruling is equally relevant under GST regime as well which contains similar provisions
7. Recovery for loss of ID cards, calculators etc.
Above mentioned recoveries from employees are covered under the definition of supply under GST law. Therefore, GST shall be applicable on such types of recoveries on OPEN MARKET VALUE due to related party transaction.
8. Diwali/ Festivals/ Other Gift
As per press release issued by CBIC on 10 July 2017, Gifts upto a value of INR 50,000 per year by an employer to his employee are outside the ambit of GST. However, gifts of value more than INR 50,000 made without consideration are subject to GST, when made in the course or furtherance of business.
|2.||SERVICES PROVIDED BY EMPLOYEE TO EMPLOYER
√ Food Expenses
√ Transportation Expenses
√ Mobile bills/ Data card
√ Training/ seminar
√ Boarding and Lodging
√ Travelling Expenses
√ Purchase of mobile Phone etc.
√ Postal and courier charges
√ Survey materials etc.
As per press release issued by CBIC on 10 July 2017
Notes: It is assumed that employer has considered Diwali/ Festival bonus, Long service awards, employee referral bonus as part of salary of employees.
If employer has not considered Diwali/ Festival bonus, Long service awards, employee referral bonus as part of salary of employees, employer may cover these items under the exemption limit of INR 50,000 under gift category.
Notes: – 1) This article is solely for the information purpose.
2) This article is based on statutory/ legal positions including judicial and administrative interpretations.
Author can be reached at [email protected] for any further clarifications, suggestions or feedback.