The government may have billed the Goods and Services Tax (GST) as a game-changer, but many employees are worried about how this tax will change the benefits game for them. GST has subsumed most indirect taxes such as VAT, service tax, octroi, luxury tax, special additional duty (SAD) and central sales tax levied by Centre and states.
The switchover puts goods and services, barring a few such as petroleum and alcohol, under a four-tier tax structure of 5, 12, 18 and 28% besides applicable cess.
But how does the GST rollout actually affect employees?
In a study on employer-employee transactions under the new tax regime, consultancy firm PricewaterhouseCoopers (PwC) said GST would be payable if the cash value of gifts provided to an employee during a financial year exceeds Rs 50,000. The term ‘gift’ has not been clarified under GST law. However, it is said to be a sum “made without consideration, is voluntary and is made occasionally”.
But what about the other perks and benefits that employees receive? We give you the lowdown on what will come under the GST ambit and what won’t:
Housing: GST will not be applicable if free housing for the employee is mentioned in the terms of the contract between the employer and employee and is a part of the cost-to-company (C2C).
GST: NO
Meals: There isn’t such thing as a free lunch, but top companies often offer their employees meals at a subsidised rate. GST will not be applicable if the caterer supplies food directly to employees, and an invoice (subsidised) is raised to the company. However, this needs an agreement to this effect to be signed between the company and the caterer.
GST: NO
Cab service: It’s common to provide cab pick ups-and-drop offs or at least drops if employees work late shifts. However, this will also invite GST under the new regime. Cab facility is a related party transaction and the employee is not eligible to claim input tax credit.
GST: YES
Vehicles: Cars for official and personal use are often given to senior staff. Employers will have no GST liability in this case as it is not considered a “supply” under the new tax regime. Cars leased by the company from a dealer and given to employees will also be exempt from GST.
GST: NO
Garage Sale: If your company is selling off old laptops at throwaway prices, think twice before you pick one up. The sale of used laptops /printers/office supplies comes under the ambit of GST. “Used laptops are given by the company to employees on FoC (Full Operational Capability) basis or at subsidised value. Such transactions would be treated as supply and accordingly, liable to GST,” the PwC analysis said.
GST: YES
Health check-ups: Corporates often provide an annual health checkup facility to employees, but this will not have any GST liability since there is no underlying “supply” per se by the company.
GST: NO
Other benefits: Perks that are part of the offer letter such as cash allowance given to staff on successful reference (up to Rs 50,000), mobile handsets, long service awards, employee welfare schemes, off-sites/town halls, relocation benefits, temporary accommodation and free gym services will be out of GST net.
GST: NO
Some things may be clear, but many remain ambiguous at this stage. Over the year, HR departments will need to work with employees and the higher management to figure out how to deal with this evolving complex reality.
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