In this article, we will discuss the treatment of gifts under the GST regime and how it is applicable
As a business owner, you should be well aware of the things that fall under the GST category. The various aspects of GST will help you manage your business properly as well as make substantial savings from the revenues of your business. It is best to fulfil all the tax obligations within the given time.
Gifts up to a value of Rs. 50,000 per year by an employer to his employees are outside the ambit of the new GST Registration. However, the gifts of a value greater than Rs. 50,000, which are made without consideration, are subject to the GST, when made in the course or furtherance of business. It has been reported that gifts and the perquisites supplied by the companies to their employees will be taxed under the GST.
What Is a Gift Under GST?
The question arises as to what constitutes a gift. A gift has not been defined in the GST law. In a common manner of speaking, a gift is an item without consideration, is voluntary in nature and is made occasionally. This cannot be demanded as a matter of right by the employee and employee cannot move a court of law for obtaining a gift.
Under the Indian taxation system, all the goods and services are categorised into 6 slabs. It is significant for all business people to know under which category their goods or services fall. The GST rate finder service is used to find the GST rates of all the goods and services. This service is also referred to as the HSN finder. By using the HSN finder, we can also find the HSN codes for goods and services.
Another issue is the taxation of the perquisites. It is relevant to the point out here that the services by an employee to the employer in the course of or in relation to his employment is outside the scope of the GST (neither supply of the goods nor the supply of services). It follows therefrom that the supply by the employer to the employee in terms of the contractual agreement entered into between the employer and the employee, will not be subjected to the GST.
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In addition to this, the Input Tax Credit Scheme under the GST does not allow the ITC of membership of a club, health and fitness centre [section 17 (5) (b) (ii)]. Therefore, it follows, that if such services are provided free of charge to all the employees by the employer then the same will not be subjected to the GST, provided an appropriate GST was paid when it was procured by the employer. The same will hold for free housing to the employees, when the same is provided in terms of the contract between the employer and employee and is a part and parcel of the cost-to-company (C2C).
Offering gifts to employees is an excellent way to appreciate their work. However, there are some notable rules that you should keep in the account to ensure that you are not violating them. Taxes can be imposed on gifts which are in the form of cheques, cash, demand draft or anything of substantial value.
Conclusion
GST is a replacement for all indirect taxes. So it will bear different shades of the different taxes it has absorbed into its system. The gift tax is the tax in question here. GST might seem a little complicated to understand because of this very reason, given that it incorporates various elements of different tax structures in order to make it generally cohesive. If you have any other queries or questions with regards to GST or any other tax related matters, get in touch with us and we will ensure that you receive the best professional assistance for your requirements.
