GST applicable on perquisites provided by the employer ?

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The Government of India, Ministry Of Finance today has come out with a Press Note that Goods & Services Tax (GST) will NOT be applicable on perquisites provided by the employer to the employee. It clarifies that the services of an employee to an employer in the course of or relation to his employment is outside the scope of GST. Accordingly supply by the employer to the employee in terms of contractual agreement entered into between the employer and the employee will not be subject to GST.

Also as the Input Tax Credit (ITC) Scheme under GST does not allow ITC of membership of a club, health and fitness center, if such services are provided free of charge to all the employees by the employer, then the same will not be subjected to GST, provided appropriate GST was paid when procured by the employer. Also there would be no GST on free housing provided by the employer to the employee when it is provided as a part of the contract between employer and employee and is a part and parcel of the Cost to Company (C2C).

The above clarifications are welcome and sets to clear a lot of ambiguity around levy of GST on employee compensation with respect to perquisites / benefits provided to an employee as part of the employment contract and is a part of C2C.


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