Page 7 - Corporate_Professional_Today

APPliCAbiliTy of GST on reimburSemenTS of buSineSS exPenSeS To emPloyeeS
and includes a declared service, but shall not
include—
3.1 An activity which merely, constitutes :
(i) a transfer of title in goods or immov- supply of goods nor supply of services. As
able property, by way of sale, gift or
in any other manner;
(ii) a transaction in money or actionable
claim;
3.2 A provision of service by an employee to
the employer in the course of or in relation
to his employment :
3.3 Fees taken in any Court or tribunal
established under any law for the time
being in force - In view of section 65B (44),
service provided by employee in the course
of employment shall not be treated as service
and, hence, will not be subjected to service tax.
Thus, salary paid to employees by employer
shall be outside the purview of service tax.
As per the Income-tax Act, 1961, ‘salary’
and ‘perquisite’ are that salary including
perquisites which could be in cash or kind.
Further, it has been clarified that any activity
falling within the four walls of the terms of
contract of employment duly documented/
agreed upon by employer and employee shall
not be liable to Service Tax, as it is nothing
but consideration in kind or a facility at a
reduced value or at a subsidized price arising
out of employment. However, the matter of
taxing services such as those of mobile and
cab for personal use has always been disputed
and diverse views still prevail.
Position under Goods and Service Tax
4. Before imposing any tax, it must be shown
that the transaction falls within the ambit
of the taxable event and that the person on
whom the tax is so imposed also gets covered
within the scope and ambit of the charging
section by clear words used in the section.
As per Section 9 of the CGST Act, 2017 levy
of tax is on ‘supply’ of goods or services or
both. One can find scope of supply u/s 7
of the said Act. Supply includes all forms of
supplies (goods and/or services) and includes
agreeing to supply when they are for a
114 January 20 To January 26, 2018 u Taxmann’s Corporate Professionals Today u Vol. 41 u 8
consideration and in the course or furtherance
of business. However, the activities specified
in Schedule III shall neither be treated as
per Schedule III to the CGST Act, 2017 the
services by employee to the employer in the
course of or in relation to employment are
neither a supply of goods nor a supply of
service. Now, it is important to analyse what
constitutes a service in the course of or in
relation to employment.
The expression “in the course of or in
relation to employment” has not been defined
in the CGST Act, 2017. Now, in order to
establish which services shall be treated as
provided by employee in the course of or in
relation to employment, it is necessary that
such services are linked with the terms of
employment as envisaged in the employment
contract. Thus, salary paid by employer to
employee for rendering services in the course
of employment shall be outside the ambit of
GST. However, uncertainties revolve around
expenses incurred by employees in the course
of performing the official duties which do not
form part of the employment contract. Now
the question is whether expenses incurred
by employees which do not form part of
employment contract be treated as in the
course of or in relation to employment?
If expenses are incurred by employees in
the course of performing the official duties
according to policy of the employer even if
they do not form part of employment contract
then the same can be treated as in the course
of or in relation to employment. However,
if reimbursement is claimed by employees
which is outside the purview of employment
contract or policy of the company then the
same may not be treated as in the course
of or in relation to employment.
Now where employee claims reimbursement
of expenses which are outside the purview
of employment contract and policy of the
company and where employer reimburses
such expenses out of the way then the
same shall be subject to goods and services
tax on the premise that supplies are in the