GST ON EMPLOYER EMPLOYEE RELATIONSHIP
Schedule III of CGST Act includes activities which are not treated as supply of goods or services i.e. GST is not levied on such transaction. One such activity included in the Schedule III “service by an employee to employer in the course or in relation to employment” is outside the purview of GST.
Analyzing various transaction between employer and employee.
Providing amenities: Providing amenities to employee is a consideration by employer to employee and hence not liable to GST. Example: Food provided to all employees without any charge will not attract GST.
Amenities provided at concessional rate: such transaction is a supply and GST is charged on the same. Example: Food provided to employees at concessional rate and the amount is recovered from their salary is taxable. Such transaction is valued at ‘Open Market’ for tax purpose.
Allowances: Transport allowance, uniform allowance are part of employment contract therefore liable to GST.
Reimbursement of expenses procured from registered supplier and the GST number of the employer is quoted on the invoice Such transaction is liable to GST and employer is eligible to claim ITC on the same.
Reimbursement of expenses procured from registered supplier and GST number is not quoted: Such transaction is liable to GST. Employer is not liable to pay GST under reverse charge mechanism (RCM) as it is procured from registered dealer.
Gifts: Gifts will be liable to GST only if it exceeds Rs. 50,000 in a year.
Sale at concessional rate: GST will be charged on such transaction. GST will apply even if ITC has not been claimed by the employer on these asset.
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