GST Issues on Transaction between Employer and Employee
Whether all the transactions between employer and employee are exempted? This is a two way transactions 1.Transactions between employers to employee 2. Transactions between employees to employer.
Transactions which are generally taken place between employers to employee:
Issue 1: Recovery of any amount towards medical insurance, food canteen services & recovery of salary already paid.
- Medical insurance – according to AAR of Maharashtra in case of POSCO India, Recovery of parent’s health insurance expenses from employees does not amount to supply of service under GST law. Therefore, GST shall not be applicable on such recovery by employers.
Also the recovery of premium amount from employee and subsequent deposit it with insurance Company cannot be treated as supply of service in the course of furtherance of business. Therefore, GST shall not be applicable on such recovery by employers.
- Food services or recovery of charges– according to AAR of Kerala in case of Caltech polymers pvt ltd, this transaction is included in the term supply and hence it is taxable.
- Recovery of salary already paid– this transaction is not fall under the definition of supply and hence it not liable for GST it is just a recovery from employee if there is any breach of terms of contract.
Issue 2: Recovery of any towards Health club/ Gym, Creche facility, Car Parking facility, T-shirts/ Diaries ,Books/ Journals subscription, Group mediclaim/ Personal accident insurance taken for all employees.
Answer: As per press release issued by CBIC on 10 July 2017, If 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
Issue 3: Sale of used assets like laptop/desktop to employees
Answer: Sales effected in stores maintained by Company as a welfare measure for employees was held as incidental to main business and hence taxable.
Issue 4: Recovery for loss of stationery
Answer: definition of supply covers this transaction and hence GST shall be applicable on such types of recoveries on OPEN MARKET VALUE due to related party transactio
Issue 5: Bonus given to employees like Diwali bonus, festive offer
Answer: As per press release issued by CBIC on 10 July 2017, Gifts upto a value of INR 50,000 per year by an employer to his employee are outside the ambit of GST. However, gifts of value more than INR 50,000 made without consideration are subject to GST, when made in the course or furtherance of business.
Transactions which are generally taken place between employees to employer:
Issue 1: Services provided by employee to employee
- As per Schedule III read with section 7 of CGST Act, 2017, services by an employee to the employer in the course of or in relation to his employment has been considered as neither supply of goods nor supply of services.
- Accordingly, any service by an employee in the course of or in relation to his employment shall not be considered as supply and GST shall not be applicable.
- As per press release issued by CBIC on 10 July 2017, 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 nor supply of services).
- therefore that supply by the employer to the employee in terms of contractual agreement entered into between the employer and the employee, will not be subjected to GST.