GST Applicability on Employee Reimbursement

[AnilKumar Vyas]

Dear Experts,

Please suggest, Is GST Applicable on following transactions:

• Payment to Employee for Vehicle running and maintenance charges at fix rate (example INR 8/- per KM) (Not part of Employee agreement and Salary offered)

  Example:

  We are paying INR 8/- per KM to X. during the month vehicle run 3,750 KM, Total amount paid INR 30,000/-

  Is company liable to pay GST on these reimbursement under RCM for supply from unregistered dealer?

• Payment to Employee for Vehicle petrol expenses at fix (Example 4,000/- per month) (It is part of salary offered but company separately paying for get income tax exemption by employee)

  Example:

  Mr. X monthly take home salary 40,000/- as per employment agreement. But company is paying 36,000/- as salary and paying 4000/- when employee request for reimburse vehicle fuel expenses.

  Is company liable to pay GST on these reimbursement under RCM for supply from unregistered dealer?

• Payment to employee for expenses done by employee on behalf of the company.

  Example:

  Mr. X is an employee and he purchased goods amount INR 6,000/- and get invoice in favor of company ( invoice not favor in invoice only show CASH MEMO) and made cash payment to supplier. Later X request to company for reimburse these expenses.

  Is company liable to pay GST on these reimbursement under RCM for supply from unregistered dealer?

Thanks for your valuable suggestion ........................

[KASTURI SETHI]

Query-wise reply is as under:-

1. No doubt these fixed expenses are not part of salary or employee agreement but these are provided on account of performing duty or we say when employees are performing duties in the employment. Therefore we can say that these fixed amounts are provided in the course or in relation to employment and hence are out of the purview of GST/definition of supply.

2. Not taxable, it being in the course or in relation to employment.

3. It is taxable on the following grounds:-

(i) it being in the course of business or in furtherance of business.

(ii) It is supply of goods to the Company(employer), ultimate recipient of goods via employee. It is possible that that supplier may be registered or unregistered person under GST. There is no question of reverse charge, if that supplier is registered under GST. However, if that particular supplier is unregistered then liability under Section 9(4) of CGST Act, 2017 arises.

So it depends upon situation to situation. Burden of proof is cast upon the company/employer to prove that supply is not in relation to business or furtherance of business or/and out of definition of supply under GST.

[AnilKumar Vyas]

Thanks for your valuable suggestion ......................

[rajkumar shukla]

@ kasturiji Regarding point no 1 if the arrangement is not part of employee agreement and salary offered, can it still be said to be in the course of employment.

2. Regarding point no3 .. there may be problem in claiming ITC if only cash memo is there, since gstn of reciepient company is not there.

[KASTURI SETHI]

Sh.Shukla Ji,

Sir, Regarding query No.3, I agree with you.

Regarding query no. 2 Yes. This is my view.

[Ganeshan Kalyani]

1. There is employer employee relationship so GST is not applicable. However, the same is not forming part of employment agreement and hence it may become taxable in the hands of the employee. But since his/her turnover would be below the threshold limit (based on the amount reimbursed the amount will not cross ₹ 20 lacs). And moreover GST on inward supply of taxable goods or services from an unregistered dealer is exempted till 30.06.2018 Hence , in all possibility GST is not applicable.

2. GST is not applicable as the amount paid is a part of salary arising out of employer employee relationship.

3. Since the provision taxing the inward supply of goods or services from an unregistered dealer is suspended till 30.06.2018, tax is not applicable on the said transaction.

AI Summary

GST Applicability on Employee Reimbursements: Vehicle Expenses, Petrol Included in Salary, and Company Purchases Explained A discussion on the applicability of GST on employee reimbursements addressed three scenarios: fixed payments for vehicle expenses not included in salary agreements, reimbursements for petrol expenses included in salary, and reimbursements for company-related purchases by employees. Experts generally agreed that GST is not applicable to the first two scenarios as they are related to employment. However, for the third scenario, GST may apply if the supplier is unregistered, as it involves business transactions. The applicability of GST also depends on the suspension of certain provisions until June 30, 2018.