In terms of Explanation appended to Section 15 it is clarified that employer and employee will be deemed to be related persons. Accordingly, in terms clause 2 of Schedule I, gift exceeding ` 50,000/- by an employer to employee will be a supply, when made in the course or furtherance of business and will be liable to tax. As, in terms of proviso to clause 2 of Schedule I, any gifts for a value not exceeding 50,000/- in a financial year will not qualify as supply and as such will not be liable to tax.
Further, as per press release dated 10th July, 2017, if services are provided free of charge to all the employees by the employer then the same will not be subjected to GST, provided appropriate GST was paid when procured by the employer. The relevant extract aforesaid press release is as under:
“Another issue is the taxation of perquisites. It is pertinent to point out here that the services by an employee to the employer in the course of or in relation to his employment is outside the scope of GST (neither supply of goods or supply of services). It follows therefrom that supply by the employer to the employee in terms of contractual agreement entered into between the employer and the employee, will not be subjected to GST. Further, the input tax credit (ITC) scheme under GST does not allow ITC of membership of a club, health and fitness centre [section 17(5)(b)(ii)]. It follows, therefore, that if such services are provided free of charge to all the employees by the employer then the same will not be subjected to GST, provided appropriate GST was paid when procured by the employer. The same would hold true for free housing to the employees, when the same is provided in terms of the contract between the employer and employee and is part and parcel of the cost-to-company (C2C).”
(ICAI FAQ PUBLICATIONS 06-09-2017 SCOPE OF SUPPLY : FAQ NO. 6)