Employee perks outside CTC to attract GST

Finance Minister Arun Jaitley today pushed four enabling pieces of legislation – Central GST Bill, Integrated GST Bil, Union Territory GST Bill and the Compensation Law - for discussion and passage in the Lok Sabha.

Jaitley had, on Tuesday, sought consensus on the bills that he said are based on the principle of "shared sovereignty" and that the government wants to pass these landmark tax reforms in the current Parliament session itself.

The Goods and Services Tax (GST), the new tax regime that will subsume a host of indirect taxes, including the central excise, service tax and state VAT among other indirect levies on manufactured goods and services. sales tax, is likely to be rolled out from 1 July 2017.

Once passed and the new tax is introduced on 1 July, a host of transactions such as leasing of land, renting of buildings as well as EMIs paid for purchase of under-construction houses will start attracting the Goods and Services Tax.

Reports say that even a free lunch, car drops, scholarship to employee's children, that are normally not part of the CTC package, can attract GST.

The GST bill Schedule II states that if goods held for the purpose of the business are put to any private use, such usage would result in a supply of services and a GST levy

Supply of goods or services to an employee without consideration, when made in the course of furtherance of business, is taxable under GST. However, gifts not exceeding ''Rs50,000 in value in a financial year by an employer to an employee shall not be treated as supply of goods and services'', says a ToI report.

However, GST could be payable if an employee exceeds his or her cost to company package and avail company's asset or their personal use. Also, the input tax credit will not be available on supply of various facilities to employees, including life and health insurance.

The Central GST (CGST) bill -- one of the four legislations introduced, states that any lease, tenancy, easement, licence to occupy land will be considered as supply of service.

Sale of land and buildings will be however out of the purview of GST, the new indirect tax regime.

Such transactions will continue to attract the stamp duty, according to the legislations Finance Minister Arun Jaitley introduced in the Lok Sabha yesterday for approval.

Electricity has also been kept out of the GST ambit.

GST rate on housing is expected to be pegged at 18 per cent.

Rent from residential premises may be exempted from GST.