Will ben­e­fit re­funds come under GST?

The Free Press Journal - - FRONT PAGE - ON­LINE ME­DIA RE­PORT

Trust this gov­ern­ment to eye even the re­im­burse­ment earn­ings in the pri­vate sec­tor. This large lu­cra­tive pie may come within the tax­a­tion net with the gov­ern­ment con­sid­er­ing bring­ing "in­di­rect earn­ing" under the Goods and Ser­vices Tax (GST). The rel­e­vant amend­ment in the GST rules may be dis­cussed and ap­proved in the next meet­ing of the GST Coun­cil, re­ports In­di­aTo­day.com. The logic un­til now was sim­ple: the re­im­burse­ments are not taxed be­cause they are claimed af­ter ex­penses have been made and rel­e­vant taxes al­ready paid. But, the counter logic is that re­im­burse­ments in­volve earn­ings made in­di­rectly and hence should be taxed.

The idea of bring­ing re­im­burse­ments in the GST net ac­crues from a re­cent rul­ing of the Au­thor­ity of Ad­vance Rul­ings on can­teen charges. In this case in­volv­ing a Ker­ala-based footwear com­pany Cal­tech Poly­mers, the AAR ruled, "re­cov­ery of food ex­penses from the em­ploy­ees for the can­teen ser­vices pro­vided by com­pany would come under the def­i­ni­tion of 'out­ward sup­ply' as de­fined in Sec­tion 2(83) of the Act, 2017, and there­fore, tax­able as a sup­ply of ser­vices under GST." The de­ci­sions by the Au­thor­ity of Ad­vance Rul­ings are not bind­ing on the GST Coun­cil. How­ever, the GST Coun­cil may con­sider the rul­ings given by the AAR while con­sid­er­ing re­vi­sion in GST rules, it is pointed out. If the GST Coun­cil agrees to ex­pand the am­bit of the GST to bring re­im­burse­ments under the in­di­rect tax net, it is cer­tainly go­ing to burn big­ger holes in the pock­ets of em­ploy­ees work­ing in pri­vate sec­tors.

So, re­im­burse­ments on home rentals, tele­phone bills, pre­mi­ums for ad­di­tional health in­sur­ance cov­er­age, health check-ups, con­veyance, gym, pro­fes­sional at­tires, en­ter­tain­ment or sim­i­lar ex­pen­di­ture may at­tract GST. The corporates will then have to re­struc­ture salaries of their em­ploy­ees, to pass on the ad­di­tional GST cost on to em­ploy­ees.

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