GST on employee expenses

[Dhruv Dua]

Company A reimburses employees for the expenses incurred by them in the field (airfare / travel etc). Some of the invoices are in the personal name of the employee and some in the name of the company.

Whether Company A is required to pay reverse charge on applicable reimbursements (employee pays to Goods transport agency for shifting of goods for example) ?

[KASTURI SETHI]

Yes. Simply explaining who bears freight expenses will pay GST under RCM. The employee is paying to GTA for and on behalf of the Company. The Co.is reimbursing to the employee. The Co.is bearing freight expenses. So the Company is required to pay GST on freight amount under RCM.

[Dhruv Dua]

Thank you very much for the clarification.

I believe the same view will hold for purchase from unregistered dealers, paid by employees, reimbursed by the company(if and when RCM becomes applicable on purchases from URD) ?

Dhruv

[KASTURI SETHI]

Yes. You are right.

[DR.MARIAPPAN GOVINDARAJAN]

I endorse the views of Sri Sethi.

[Abhishek Sethi]

Company's policy shall be relevant in such cases to determine as to whether the Company has incurred such expense or has merely paid to employee an amount in nature of fixed reimbursement (which may or may not be equivalent to transporter's Invoice).

Additionally, if it is accepted that expense is incurred by Company - then what shall be treatment of such expense for Income Tax purposes? TDS on transportation charges?

Kind regards,
Abhishek

[Mahadev R]

I concur with Mr.Kasturi Sethi

AI Summary

Companies Liable for GST Under RCM on Employee-Reimbursed Freight Expenses via GTA; Consider TDS on Transport Charges A company reimburses employees for expenses incurred in the field, such as airfare and travel, with invoices sometimes in the employee's name and sometimes in the company's. The main question is whether the company must pay GST under reverse charge mechanism (RCM) on these reimbursements, particularly when employees pay a goods transport agency (GTA) for shifting goods. The consensus is that the company must pay GST under RCM since it ultimately bears the freight expenses. Additionally, this principle may apply to purchases from unregistered dealers if RCM becomes applicable. Company policy and tax treatment, including TDS on transportation charges, are also relevant considerations.