TaxTMI 
TaxTMI 
GST Query – Inter-company Employee Transfer & Gratuity Recognition
X X X X Extracts X X X X
X X X X Extracts X X X X
....ST Query – Inter-company Employee Transfer & Gratuity Recognition<br> Query (Issue) Started By: - Narayan Pujar Dated:- 28-1-2026 Last Reply Date:- 1-2-2026 Goods and Services Tax - GST<br>Got 3 Replies<br>GST<br>In a group structure, Company A and Company B permit inter-company transfer of employees as per a common HR policy. Upon such transfer, Company B recognises the past service rendered by....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the employee in Company A for the purpose of gratuity eligibility and correspondingly the accumulated gratuity liability is transferred from A to B. I see issue that arises in cases where: * The employee has completed less than 5 years of service at the time of transfer from Company A (say 4 years), and * Due to recognition of past service by Company B, the employee becomes gratuit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y-eligible within one additional year of service with Company B, whereas had the employee moved outside the group, such benefit would not have accrued. Query for discussion: Can the accelerated gratuity eligibility, arising solely due to group HR policy, be construed as a "service" provided by Company B to the employee, or as a taxable benefit under GST? Reply By Ganeshan Kalyani: The Reply: S....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ir, there is not GST implication on gratuity as such. There is no GST on employee-employer relationship. Reply By Shilpi Jain: The Reply: At the most this could be considered as a sharing of cost. Though documentation like employee offer letter, accounting in books, etc. will play a vital role to ensure that in case any dispute is raised by department for this, there is enough material to substa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ntiate and support the facts. Reply By KASTURI SETHI: The Reply: (i) Gratuity cannot be consideration. It is reward, boon or gift /retiral benefit for the good and efficient services performed by an employee and it depends upon sweet will of the Employer. The basis is various judgments of Hon'ble Supreme Court. I agree with Sh. Ganeshan Kalyani, Sir. (ii) There are contradictory case laws r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....egarding cost sharing on account of such inter-company transfer/transaction. (iii) It is covered under Clause No. (1) of Schedule-III Section 7 of CGST Act. <br> Discussion Forum - Knowledge Sharing ....