Example 32

Company A gives Diwali gift valued at  Rs. 15000 and gift of laptop valued at  Rs. 25000 to their employee R and also provided free food vouchers valued at Rs. 1500 per month, which is not included in CTC of employee R.  Whether the supply made by employer to employee is taxable under GST.

Ans.                                                                                          

Service by employee to employer in course of employment is neither supply of goods nor supply of services according to Schedule III of GST law. However, employer and employee relation is covered under definition of related party defined in explanation of section 15. Schedule I paragraph (2) specifies that supply of goods or services or both between related persons or between distinct persons according to section 25, when made in the course or furtherance of business is treated as supply under GST. Proviso to this paragraph also provides that gifts not exceeding fifty thousand rupees in value in a financial year by an employer to an employee shall not be treated as supply of goods or services or both.

In the above example value of supply aggregated in the financial year is of Rs. 15000+ Rs. 25000+Rs. 18000 = Rs. 58000, i.e. it exceeds Rs. 50000. Hence this supply is taxable under GST.