The finance ministry announced that any gift from the employer costing up to ₹ 50,000 to the employees would not be taxed under GST. The ministry said that the discussion was making round that the gifts from employers to the employees would fall under GST. However, gifts up to ₹ 50,000 a year would be spared from GST. The ministry also added that any gift which costs more than the said amount would fall under GST and will be taxed.
Archit Gupta, the CEO of ClearTax explained the concept. In case the employers use any business related goods for private purpose or purpose that is not involved in the business, the act would be considered as service, regardless of the involvement of payment.
The threshold of tax exemption is ₹ 50,000. In case the gift surpasses this amount, the individual will have to pay tax. Even if the gift is made in kind, the individual will have to make the payment.
Since the definition of gift is not explained in the GST law book, the finance ministry attempts to define this. Any payment which is made without the consideration of the individual occasionally and for which the employee will not be able to file any lawsuit is considered as a gift under GST law.
There are other employee and employer transaction like any service done in the course of employment would not fall under GST. The finance ministry explained the input credit tax or ITC as well. It is said that GST law does not accept ITC of membership of club or health center.
According to ITC scheme, in case such services are offered for free to the employees then the services would not fall under GST. The similar scheme would be applicable for free lodging offered to the employees.