Business promotion expenses

Staff Welfare 

Although staff welfare, it is in the nature of a gift.

For an employer, an employee is a related person, and therefore it will be considered as a supply by the employer.[Schedule 1 para 2]

However, if the value of this gift is up to INR 50,000, then it shall not be treated as a supply.

If the value exceeds 50,000, then GST would be applicable, and you won't be able to take it's credit either.

Kindly note: if the expense is not covered by the terms of employment, then it would be considered as a gift because a gift is made without consideration, is voluntary in nature and is made occasionally. It can not be demanded as a matter of right by the employee and the employee can not move a court of law for obtaining it,

For a bike gifted to an employee:

• Accounting: Staff Welfare (or Employee Benefits – Gifts). If bought in the employee's name, the company pays the dealer directly, and the bike is never the company's asset.

• Income-tax for the employee: it is a perquisite. Gifts in kind above Rs 5,000 a year are taxable (Rule 3(7)(iv)), so the full bike value (less Rs 5,000, in the old regime) is added to his salary in Form 16, with TDS under Sec 192. Cash or voucher gifts are fully taxable.

• Company: deductible as employee welfare or remuneration (Sec 37(1)). Not a "related-person" disallowance under 40A(2), since a non-director employee isn't a related person.

• GST: ITC on the bike is blocked (Sec 17(5)(a)/(h), motor vehicle and gift). A gift to an employee above Rs 50,000 a year is a deemed supply (Schedule I), but since ITC isn't taken, there is no practical GST effect. Don't claim ITC.

• Buying it in the employee's name avoids RC transfer formalities and is fine.