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APPliCAbiliTy of GST on reimburSemenTS of buSineSS exPenSeS To emPloyeeS

Transaction Nature of Type of GST Input
Transaction Expense Applicability Tax Credit
-Fixed allowance dis- demarcate the proportion of
bursed by employer services used for official and
personal purposes.)
GST shall not apply, since
it will be treated as part
of salary forming part of
employment contract.
Relocation Employees claim reim- Relocation GST shall not apply, since Yes, credit shall
bursement of expenses, expenses such services are performed be available except
such as travel related by employees in course of those specified
expense, when relocated carrying out the official duties. under section
to a different city. 17(5).*
Birthday Gifts purchased by Staff GST shall not apply as the No credit shall be
celebrations employees and thereafter Welfare reimbursement is made as per available in view
reimbursement for the Expenses the policy of the company of section 17(5).
same is claimed as per and will therefore fall under
the HR policy of the the purview of Schedule III.
company.
Marriage Gifts purchased by Staff GST shall apply if such reim- No credit shall be
Anniversary employees on marriage Welfare bursement doesn’t form part available in view
a nn i v e rs a r y an d Expenses of the employment contract of section 17(5).
thereafter reimbursement and policy of the company
given to employees. and the same shall be taxable
if the value of gifts exceeds
` 50,000 in a financial year
in view of Schedule I.
Hotel Reimbursements claimed Hotel GST shall not apply, as such Yes, if services
Accommodations by employees for hotel expenses services shall be treated as availed from reg-
stay while on tour. provided by employees in istered dealer*
course of performing the
official duties.
Restaurant Reimbursement claimed Food GST shall not be applicable if No credit shall be
services by employees for foods expenses such services are performed available due to
and beverages. in the course of carrying out restriction capped
the official work. by section 17(5).
Offsite Tickets and hotel booked Tour & GST shall not apply as notional Yes, if services
by employee on behalf Travelling amount of such visits is availed from reg-
of employer and there- expense added in the CTC of the istered dealer*
after reimbursement of employees and forms part
the same is claimed. of the employment contract.
Note*: Input tax credit shall be available the criteria to determine the non-taxability of
subject to condition that the tax invoice the transaction? There are several ambiguities
contains name and GSTIN of employer. revolving around the taxability of transactions
This area is likely to see a lot of litigation which do not form part of employment
under GST law as diverse views prevail as contracts. It is necessary to understand such
to what shall be treated as in the course transactions and view them under the lens
of or in relation to employment. Whether of GST law.
resorting to employment contracts shall be lll

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January 20 To January 26, 2018 u Taxmann’s Corporate Professionals Today u Vol. 41 u 11