GST on staff welfare

[Kaustubh Karandikar]

YZ (Proprietary Concern) supplying food to their employees as well as providing accommodation to them for stay, rent of which is paid by XYZ. No amount is recovered by XYZ from the employees for this facility. Is XYZ liable to pay GST on it? If yes, how to arrive at the value for paying GST?

[KASTURI SETHI]

Dear Sir,

In this connection here is a case law.

2018 (18) G.S.T.L. 508 (A.A.R. - GST) = 2018 (10) TMI 748 - AUTHORITY FOR ADVANCE RULING, ODISHAIN RE : NATIONAL ALUMINIUM COMPANY LTD.

[KASTURI SETHI]

In my view, no company would provide food and accommodation free of cost to their employees whatever may be the background.The Company may charge in some guise. The department has eagle, eye. The department knows very well how to unearth hidden facts.This activity is covered under Schedule-II Serial No.1 & 2 and both activities are taxable For valuation purpose resort to Rule 28 (a) of CGST Rule, 2017. Advise your client to leave this idea of "Free Lunch". It is not free at all. Nothing is free.

[Ganeshan Kalyani]

If no recovery is made from the employee then no GST is applicable. However, the department may raise a question on this part.

[Spudarjunan S]

Dear Sir,

While providing such amenities to employees without any recovery, it would be diligent to include such clauses in the terms of employment contract providing all the amenities would be provided to employee in the course of his employment. This stand would effect your TDS deduction towards salary of employees by treating the amenities as Perquisites which you need to take care.

Once these amenities are provided by employer to employee for the employment services provided by employee to employer then the same would get it covered under Schedule III of CGST which would be "neither supply of goods nor supply of services".

However, in relationt to eligibility of ITC on such expenses you need to follow the conditions and restructions provided u/s 16 & 17 of CGST Act.

AI Summary

GST on employer-provided amenities may be taxable supply or non-supply perquisites, impacting valuation and ITC eligibility. Employer provided food and accommodation given free to employees may be taxed as a supply under Schedule II with valuation under Rule 28(a); alternatively, absence of recovery may be argued to negate GST though subject to departmental scrutiny; documenting amenities as employment perquisites can place them under Schedule III as neither supply, but input tax credit on such expenses remains subject to sections 16 and 17 of the CGST Act.