As per rules, the Goods and Services Tax (GST) is applicable on any transactions between two related parties, even if the transaction is done without a consideration. Similarly, the relation between employer and employee is kept under GST, but any consideration payable to an employee by the employer is kept outside GST. This led to confusion and ambiguity.
However, the Central Board of Indirect Taxes and Customs (CBITC) has now clarified that perquisites provided by employers to employees are not subject to GST, and emphasised that penalties can only be levied in cases involving fake invoices, as no goods are supplied. A perquisite is a non-cash benefit granted by an employer to the employees such as transportation, canteen, healthcare, insurance, and so on.
The CBITC has clarified that neither the services rendered by employees to employers nor perks provided to them by their firms would be subject to GST.
The rule will be applicable from July 2017.
The ambiguity was there because different authorities had different opinions on this. For instance, the Authority of Advance Ruling in Maharashtra had ruled that the bus facility provided by Tata Motors at a nominal price was exempted from GST, but a similar facility provided by Beumer India was put under GST by Haryana AAR. In another incident, GST was levied when employees paid for food services in the office canteen in a company in Kerala.