GST on rent of employee paid by employer

[Kaustubh Karandikar]

1) Employees of XYZ Ltd. are staying in a rented flat and rent for the same is paid by XYZ.

2) Employees is paying house rent and recovering from XYZ. Under both these situations, since employee is treated as related persons as per GST provisions, it will be treated as service provided to employees and therefore XYZ will be liable to pay GST on it under forward charge even if there is no consideration received by XYZ? Views of the experts please.

AI Summary

GST on employer-paid rent may attract reverse charge for registered recipients, raising contested ITC and perquisite issues.
Contractual perquisites provided by an employer to an employee are treated as not constituting a taxable supply under Schedule III when they are in lieu of services under the employment contract. Renting of residential dwellings was exempt but the exemption for dwellings rented to registered persons was withdrawn from 18 July 2022, attracting reverse charge liability on the registered recipient. This creates potential disputes over entitlement to input tax credit because of personal-consumption restrictions; arranging tenancy in the employee's name with employer reimbursement is suggested to avoid RCM and ITC risk.