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Gst on transfer of company owned car to employee

22 April 2024

IS Gst is applicable in case if transfer of company owned leased car to employees? If yes , at what rates ,if no -why?

Case : An employee availing company owned leased car . After 2 years , employee wants to buyback the car at fair value. Leased rentals collected every month from him but it is not shown in the salary slip.It is part of the CTC.

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RAJA P M ("Do the Right Thing...!!!") (127196 Points)
Replied 22 April 2024

Your query is not clear...

Bcoz, I can't understand as

Is that Car is leased car or own car of company...

Is this leased to employee...??

If Yes, then rental amount collected from employee... Right...???

Money Money (383 Points)
Replied 23 April 2024

In the case of a company transferring a leased car to an employee, GST (Goods and Services Tax) implications can vary based on the specifics of the transaction. Generally, when a company sells a car to its employees, they do not charge GST as it has already been paid during the vehicle’s procurement. Therefore, when employees buy a car from the company, they typically do not pay GST at that point1.

However, it’s important to note that this GST is eventually collected from the employee in the form of a perquisite tax1. This means that while GST may not be directly applied to the transaction of the car transfer, the tax liability is transferred to the employee as a taxable benefit.

In the scenario you’ve described, where an employee wants to buy back the car at fair value after 2 years, and the leased rentals have been collected every month as part of the CTC but not shown in the salary slip, the transaction would likely be considered a supply of goods under GST law. If the company is registered under GST, this transaction would be taxable, and GST would need to be paid at the applicable rates.

The rate of GST on the leasing and sale of motor vehicles was provided in Notification No. 37/2017 – Central Tax (Rate) dated 13.10.2017, which offers an abatement of 35% to the lessor who is in the business of leasing motor vehicles. This means GST would be levied on 65% of the applicable GST rate on such motor vehicles.

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