Free office food; home drops may attract GST

You may soon see some company perks dwindle away as the goods and services tax (GST) comes closer to being implemented.

A report in the Times of India says the government will impose GST on any free goods and services provided to an employee exceeding a pre-defined amount.

This means that various amenities provided to employees, such as free food, car pick-up and drops -- essentially anything which is not part of their CTC and thus not subject to income tax -- can attract the new levy.

As per GST Bill, which is slated to be discussed in the Lok Sabha today for passage, even gifts given by the employer that exceed Rs 50,000 in value in one financial year will be treated as a supply of goods and can be taxed.

The employer may not even be able to avail an input tax credit on various facilities he or she may provide to the employees. For instance, free or subsidised food, health insurance or home drop facilities will not fetch the employer an input tax credit.

The Bill also says that any supply of goods and services made to a related party - such as employees - without consideration, but within the course of the furtherance of business, will be taxed under the new indirect tax regime.

Schedule II of the Bill spells out the goods and services that can be taxed under the GST. Here a clause says that any goods which are meant to be used for business purposes, but are put to private use, irrespective of a consideration given, can be considered a supply of services and will be taxed.

Tax experts say that given the language, a car given by a company to an employee for personal and office used is also a service and will attract a GST.

Still, the clauses have perplexed experts as there is not enough clarity as to which facility provided to the employees will be considered a 'supply of goods and services' and hence can be taxed. They also say there is no clear definition of the word 'gift' in the GST Bill.