Raj Jaggi
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When Modern Employment Crossed the Boundaries of Salary The traditional employer-employee relationship was once viewed in relatively simple terms. An employee rendered services, and the employer paid a salary in return. Over time, however, modern corporate structures gradually transformed this arra
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FAQ :
The main controversy is whether employee welfare benefits (perquisites) provided by employers are considered taxable supplies under the GST regime, rather than falling outside its scope as part of the employment relationship.
The GST law treats employers and employees as 'related persons,' which can complicate the taxability of transactions between them, even if they are intended as welfare benefits.
The financial burden test examines who bears the economic burden of an arrangement. If the employer substantially funds the facility and employee contribution is nominal, it's more likely a welfare benefit. If costs are largely recovered from employees, it may be a taxable commercial transaction.
No, the Income-tax treatment alone does not conclusively determine GST liability. GST authorities examine the commercial substance of the arrangement, not just how it's classified for income tax purposes.
Documentation is critical. Appointment letters, HR manuals, and contracts are scrutinized to determine if a facility is an express part of the employment terms and a genuine welfare measure.
The circular clarified that perquisites provided under contractual employment arrangements ordinarily remain outside GST, emphasizing the contractual and structural nature of the arrangement and its welfare-oriented character.
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