Free lunches, scholarships for employees’ children, office car for personal use may all become a thing of the past with the Goods and Services Tax Bill coming into effect from July 1, 2017.
According to a report by The Times of India, any benefits extended to an employee over and above his Cost-To-Company (CTC) and beyond the Rs 50,000 threshold may attract a tax under the GST regime. This could included free subsidised food provided to employees, beverages, group and life insurance, gym or fitness club memberships, scholarships, taxi services, etc.
This is because of a provision in the GST Bill called ”supply made without consideration” which is taxable.
According to the report, the supply of goods and services is taxable under GST and “supply of goods or services to a related party (a term that includes employees) without consideration, when made in the due course of furtherance of business, is taxable under GST.
Apart from this, the report also notes that input tax credit would not be available for the employer on the supply of various benefits provided to the employee, This includes life or health insurance.
The use of company assets used by an employee are taxable under the ambit of GST. According to the report, the Bill says, “where goods held for the purpose of the business are put to any private use, whether or not for a consideration, such usage would result in a supply of services and a GST levy.” Going by this definition, a car provided to an employee for his official and private use would be taxable.
In such a case, the employer should be given the benefit of input tax credit which is not currently available.