Will benefit refunds come under GST?

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.