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Applicability of GST on reimbursements of

business expenses to employees

Introduction N. K. GUPTA
Sr. Executive
1. Every organisation incurs expenses in order to carry out day-to-day Director S S Kothari
business operations. Sometimes employees and not just employers are Mehta & Company
the ones who incur expenses. That’s where employee reimbursements
kick in. In this backdrop, it will be quite interesting to analyse the
applicability of the newly introduced Goods and Services Tax on
such employee’s reimbursements. The much awaited Goods and
Services Tax Act, 2017 has addressed the taxability of employee’s
reimbursements to some extent. Before discussing on the taxability,
it is important to understand the term “Employee reimbursements”.
What constitutes employee reimbursements?

2. The expression “employee reimbursements” has not been defined
in the law. In general parlance, it is a method for paying employees
back when they spend their own money on business-related expenses.
The common practice adopted in the industry is that employees incur
expenses such as on travel and food on business tours from their
own pocket and claim back the money spent from the employer in
the form of reimbursements. The other practice prevailing is wherein
advance is given to employee for incurring business expenses in the
form of imprest. The various expenditures incurred by employees
which are claimed as reimbursements are listed below:
1. Cab Facility availed by employees on official tours
2. Food expenses incurred by employees
3. Travel expenses on business tours
4. Hotel and Accommodation expenses
5. Meeting Expenses
6. Mobile Expenses

Position under Service Tax
3. In terms of section 65B(44) of the Finance Act, 1994, “service”
means any activity carried out by a person for another for consideration,

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January 20 To January 26, 2018 u Taxmann’s Corporate Professionals Today u Vol. 41 u 7