July 12, 2017
Perks, Gifts to Employees Under GST
India Inc may have to deal with another avatar of GST — the tax may be applicable on senior executives’ big-ticket perquisites over and above those mentioned in the employment contract and on gift items of over Rs 50,000. However, companies should be able to claim input tax credit on these intracompany ‘transactions’.
Tax professionals ET spoke to said the rate may be in the 18% band, depending on the nature of the perk/gift. A finance ministry official, who did not wish to be identified, said an employer’s gifts to employees will be treated as supplies without any consideration and attract GST. However, companies are likely to be able to claim input tax credit on it. Keeping tabs on company perks and gifts will not be an additional enforcement cost to the government, tax experts said. All purchases by companies will be available on GSTN. Therefore, during audits these issues can be easily identified. GST rules say services by an employee to the employer will not attract tax if they are related to his/ her employment. However, other kind of services may attract GST. “If an employee acts as a DJ in a company offsite and gets paid, such payment by his employer will attract GST,” said Waman Parkhi, partner, indirect tax, at consultancy firm KPMG.