Perks, gifts to staff up to Rs50,000 will not attract GST, says govt
The government’s clarification says that services by an employee to an employer in relation to his job are outside the scope of GST
New Delhi: The government on Monday clarified that benefits such as use of cars, gyms and other amenities extended to staff by employers as part of the employment contract as well as occasional gifts up to a value of Rs50,000 will not be subject to goods and services tax (GST).
The clarification is in line with the principle that compensation or salary given to staff for rendering a service is not subject to tax. The clarification says that services by an employee to an employer in relation to his job are outside the scope of GST.
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The same applies to free housing to employees provided as per the employment contract and forming part of their cost to the company.
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However, in the case of gifts, this relief is available only up to a value of Rs50,000 as these are given voluntarily and are not part of the compensation which an employee can claim as a right.
Experts welcomed the clarification, saying it brought relief to businesses. “It has been clarified that anything done by an employer for an employee in terms of employment contract will not be subject to GST. These should include benefits offered in terms of providing cars for official use, free meals, gyms and such other amenities as part of an employment contract,” said Pratik Jain, partner and leader, indirect taxes, at PwC India.
The finance ministry clarified that although the term gift had not been defined in the GST law, in common parlance, it is voluntary in nature and is given 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,” said the ministry.
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Separately, the ministry also clarified that GST on sanitary napkins is a tad lower than what it was earlier. It attracts a 12% GST rate compared to 13.7% tax burden in the earlier system, the official statement said.