Wednesday, August 23, 2017

Treatment of Gift and Perquisites under GST

The Goods and Services Tax (GST), the biggest economic reform, has been implemented in India since 01 July 2017. Every new thing comes out with fresh challenges, similar is the case with GST. With the passage of GST in India, there seem to be humongous challenges revolving around Gift and Perquisites provided by an Employer to their Employees.

In terms of GST Laws, CGST and SGST or IGST shall be levied on supply of goods or services or both. Further, the supply includes activities as specified in Schedule I to GST Act even if made without consideration. Accordingly, tax will be levied on all such activities.

Entry 2 of Schedule I states

"Supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business" "Provided that gifts not exceeding fifty thousand rupees in value in a financial year by an employer to an employee shall not be treated as supply of goods or services or both". Further, as per Section 15 of the GST Laws, employer and employee are considered as "related parties". On reading of the said entry, we understand that gifts provided by an employer to employee exceeding fifty thousand rupees are leviable to tax. However, the term "Gift" has not been defined under the GST Laws. Accordingly, the term gift is open for interpretation

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