I would like to know the impact of GST on the salary structure of the employees who join after the implementation of GST. What are the best practices that we could implement in the salary structure to make this a win-win situation for both the employer and the employee?
The question specifically pertains to reimbursements considering the new taxation system. For example, how can mobile reimbursements, driver expenses, fuel costs, and car allowances be integrated into the CTC to create a more effective arrangement for both parties?
From India, Mumbai
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The question specifically pertains to reimbursements considering the new taxation system. For example, how can mobile reimbursements, driver expenses, fuel costs, and car allowances be integrated into the CTC to create a more effective arrangement for both parties?
From India, Mumbai
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Dear RAITON MENEZES ji, I am not a GST expert, but I will try to provide an answer to your query based on the basic knowledge I have acquired on GST. Although there are many grey areas in some provisions of GST, when it comes to salary or employment costs, there is generally no impact of GST.
However, in cases where there is a supply of free goods or services to an employee exceeding the stipulated sum, or if an employee utilizes company assets for personal use such as a car or a house, it could trigger GST implications. It is important to note that the mechanism of input credit under GST, specifically input tax credit, will not be available on the supply of various facilities to employees, including life and health insurance.
If your CTC structure includes certain costs of facilities or fringe benefits, it is advisable to seek expert advice on formulating it effectively.
Thank you.
From India, Mumbai
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2584However, in cases where there is a supply of free goods or services to an employee exceeding the stipulated sum, or if an employee utilizes company assets for personal use such as a car or a house, it could trigger GST implications. It is important to note that the mechanism of input credit under GST, specifically input tax credit, will not be available on the supply of various facilities to employees, including life and health insurance.
If your CTC structure includes certain costs of facilities or fringe benefits, it is advisable to seek expert advice on formulating it effectively.
Thank you.
From India, Mumbai
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Introduction of GST and Its Impact
On 1 July 2017, the government introduced GST — Goods and Services Tax. This new comprehensive indirect tax has replaced indirect taxes like service tax, octroi, central excise duty, and VAT. GST, which was under consideration and discussion since 1999, is expected to simplify the tax structure, create ease in logistics, increase government tax revenue, and make tax evasion difficult. It is expected to have a significant impact on businesses of all scales.
Impact on Compensation and Benefits
GST does not cover income tax and therefore does not have a direct bearing on salaried employees and organizations' compensation and benefit programs. However, it can affect certain parts of it. The perks, gifts, and subsidies — such as travel, food, and other subsidized amenities given to employees, which are not part of their official CTC, will be covered by GST. All the services provided by an employee to their employer within the scope of their employment contract will always be outside the ambit of GST and within the ambit of income tax. Services provided to the employer on a principal-to-principal basis as an individual (e.g., part-time gym trainer services apart from normal employment services) could attract GST.
From India
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On 1 July 2017, the government introduced GST — Goods and Services Tax. This new comprehensive indirect tax has replaced indirect taxes like service tax, octroi, central excise duty, and VAT. GST, which was under consideration and discussion since 1999, is expected to simplify the tax structure, create ease in logistics, increase government tax revenue, and make tax evasion difficult. It is expected to have a significant impact on businesses of all scales.
Impact on Compensation and Benefits
GST does not cover income tax and therefore does not have a direct bearing on salaried employees and organizations' compensation and benefit programs. However, it can affect certain parts of it. The perks, gifts, and subsidies — such as travel, food, and other subsidized amenities given to employees, which are not part of their official CTC, will be covered by GST. All the services provided by an employee to their employer within the scope of their employment contract will always be outside the ambit of GST and within the ambit of income tax. Services provided to the employer on a principal-to-principal basis as an individual (e.g., part-time gym trainer services apart from normal employment services) could attract GST.
From India
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