Article: GST to be mounted on amenities outside CTC

Compensation & Benefits

GST to be mounted on amenities outside CTC

As the Indias single tax system- GST is all set to be introduced from July 1, lets look at ways how GST will impact amenities offered to employees outside cost to company (CTC)
GST to be mounted on amenities outside CTC

After the passing of historic GST legislation, the eyes are all set on its implementation and its trickling impact on all sectors. For corporates, here is the news - GST will be applicable on all amenities outside CTC (cost to company). 

As per the new GST bill, if an employee receives free goods and services beyond its stipulated sum then GST would be applied. Also, if any employee uses company’s asset for personal use, then also GST would be mounted on it. As CTC structure differs in companies, broadly all free luncheons, scholarships to employees’ children, car drops other such services will fall under this purview. 

In addition, input tax credit will not be available on supply of several facilities including life and health insurance to employees. There is negation of input tax credit on free and subsidized food and beverages on at workplace, cab facilities, club and fitness memberships etc. Only those services which an employer is mandated to provide under law to employees, as notified by government, will not be denied input tax credit. 

Looking closely at GST code, the main pivot to the whole debate is that supply of goods and services when made in furtherance course of business, without consideration towards any employee is taxable. 

However, the GST cites an exception mentioned in Schedule 1 of the bill, where gifts not exceeding Rs 50,000 in value in a financial year by an employer to an employee shall not be treated as supply of goods or services or both.

SCHEDULE I   

[Section 7]

Activities to be treated as supply even if made without consideration

Supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business:

 

Provided that gifts not exceeding fifty thousand rupees in value in a financial year by an employer to an employee shall not be treated as supply of goods or services or both

Under Schedule two , goods held or used for the purposes of the business are put to any private use other than a purpose of the business, whether or not for a  consideration would result in supply of Goods and Services and GST would be levied on them.  

SCHEDULE II 

[Section 7]

 

ACTIVITIES TO BE TREATED AS SUPPLY OF GOODS OR SUPPLY OF SERVICES

4. Transfer of business assets - Clause (b) - where, by or under the direction of a person carrying on a business, goods held or used for the purposes of the business are put to any private use or are used, or made available to any person for use, for any purpose other than a purpose of the business, whether or not for a consideration, the usage or making available of such goods is a supply of services;

Other key features of GST bill include - GST won’t be applied on high-speed diesel, motor spirit (petrol) and petroleum crude, natural gas. It will be decided when GST would be levied on them. Also an additional tax of up to 1% will be levied by centre on inter-state supply of goods.

In the current scenario, constitution offers for division of taxation powers between Centre and State. The indirect taxes including excise duty, sales tax, service tax, octroi, customs duty etc. are imposed on goods and services. Some taxes are levied by Centre and some by states. Tax rates vary across different states, when taxes are imposed by state.  

Now after the bill is passed, all indirect taxes will be subsumed under harmonized single taxation system.  GST is actually value added tax levied on goods and services. The new regime will help broaden the tax base, and help compliance of tax more efficiently. Also, it will reduce economic biases faced during inter-state movement.  

Lok Sabha passed all four proposed goods and services tax (GST) related bills which will subsume all indirect taxes under one tax. The government seeks increased revenue and economic growth after its adherence. 

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Topics: Compensation & Benefits

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