Business

Will GST be levied on gifts from employers?

10 Jul 2017 | By Ramya Patelkhana
GST and gifts to employees

It's been nearly 10 days since Goods and Services Tax, India's most ambitious tax reform, was launched.

Change is never easy and the unified tax system did create confusion, including whether gifts/perquisites from employers will attract GST.

So, Finance Ministry released a statement clarifying gifts worth up to Rs. 50,000 per year from an employer are outside GST ambit.

Know more!

In context: GST and gifts to employees

10 Jul 2017Will GST be levied on gifts from employers?

What constitutes a gift? FinMin explains

The Ministry stated: "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."
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Centre quashes media reports, clarifies rules

RulesCentre quashes media reports, clarifies rules

Finance Ministry said if an employee receives gifts from his/her employer worth below Rs. 50,000 in a year, in cash or kind, they are exempt from the GST ambit.

However, gifts are subject to GST, if their value exceeds Rs. 50,000 and they are "made without consideration in the course or furtherance of business."

GST will not be levied on salaries.

Transactions/DealingsMinistry on other employer-employee transactions

Finance Ministry said services by employees to their companies relating to or during their employment are not subject to GST.

Benefits/services offered to an employee by the employer as part of Cost-to-Company, including free housing, under a contractual agreement entered into by both the parties will not attract GST.

However, Input Tax Credit isn't applicable for membership of health/fitness centers or clubs.

Finance Ministry's statement

"If such services (gifts/perquisites) are provided free of charge to all the employees by the employer then the same will not be subjected to GST. These services will not be subjected to GST provided appropriate GST was paid when procured by the employer."

ExplanationWhat does the Finance Ministry mean?

Explaining Finance Ministry's statement in detail, Archit Gupta, the CEO of ClearTax, said if employers allow the use of goods/assets for private purposes, which isn't business related, by employees, it is nothing but a supply.

He added anything treated as a supply will attract GST; the ministry has only clarified that "up to Rs. 50,000 there is no tax implication".

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Govt's EffortsGovt wants to clear confusion surrounding GST

The government claims GST is advantageous to the country as it is expected to up the GDP by 2%.

But there have been reports of a lot of confusion surrounding it.

So, Finance Ministry undertook several initiatives to educate and also familiarize people and businesses with GST.

The government also recently launched a mobile app 'GST Rate Finder' for Android devices.