GIFTS UP TO RS. 50,000/- PER YEAR BY AN EMPLOYER TO EMPLOYEE ARE OUTSIDE THE AMBIT OF GST: PIB

posted by: corporate

Gifts up to value of Rs. 50,000/- per year by an employer to his employee are outside the ambit of GST. However, the gifts of value of more than Rs.50,000/- made without consideration are subject to GST, when made in the course of furtherance of business.

The Government of India, Ministry of Finance has issued a notification dated 10th July, 2017 stating that gifts and perquisites supplied by companies to their employees will be taxed under GST. Gifts up to the value of Rs.50,000/- per year by an employer to his employee are outside the ambit of GST. However, gifts of value more than Rs.50,000/-made without consideration are subject to GST, when made in the course of furtherance of business.

The question arises as to what constitutes a gift. Gifts has not been defined in the GST Law. 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.

Another issue is the taxation of perquisites. It is pertinent to point out here that the services by an employee to the employer in the course of or in relation to his employment is outside the scope of GST (neither supply of goods or supply of services). It follows therefrom that supply by the employer to the employee in terms of contractual agreement entered into between the employer to the employee will not be subject to GST. Further, the Input Tax Credit (ITC) Scheme under GST does not allow ITC of membership of club, health and fitness centre. It follows therefore that if such 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. The same would hold true for free housing to the employees, when the same is provided in terms of contract between the employer and employee and is part and parcel of the cost-to-company (C2C)