GST To Be Levied On Amenities Outside CTC

As India’s single tax system GST is all set to be introduced from July 1, let’s look at ways how GST will impact amenities offered to employees outside cost to company (CTC).

- Vani Vyas

After the passing of historic GST legislation, the eyes are all set on its implementation and its trickling impact on all sectors. For corporates, here is the news — GST will be applicable on all amenities outside CTC (cost to company).

As per the new GST bill, GST would be applied if an employee receives free goods and services beyond its stipulated sum. GST would be mounted if any employee uses company’s asset for personal use. As CTC structures differs in companies, broadly all free luncheons, scholarships to employees’ children, car drops other such services will fall under this purview.

In addition, input tax credit will not be available on supply of several facilities including life and health insurance to employees. There is negation of input tax credit on free and subsidized food and beverages on at workplace, cab facilities, club and fitness memberships etc. Only those services which an employer is mandated to provide under law to employees, as notified by government, will not be denied input tax credit.

Looking closely at GST code, the main pivot to the whole debate is that supply of goods and services when made in furtherance course of business, without consideration towards any employee is taxable.

However, GST cites an exception mentioned in Schedule 1 of the bill, where gifts not exceeding Rs 50,000 in value in a financial year by an employer to an employee shall not be treated as supply of goods or services or both.