Any non-cash perks that an employer gives employees will be taxed under the Goods and Services Tax (GST) law, the Centre said on Monday.
The clarification came amid doubts about whether fringe benefits such as chauffeur-driven cars and holidays given to senior executives would be taxed under GST.
However, monetary compensation paid to employees will not attract GST as it does not qualify as supply.
The component will continue to attract the relevant income tax, according to the Central Board of Excise and Customs (CBEC) latest clarification.
CBEC, which comes under the administrative control of the Arun Jaitley-headed Finance Ministry, is the apex body for the country’s indirect taxes.
‘The compensation to employees in the form of money is not a supply. However, fringe benefits are a supply of goods or services and are liable to tax if not exempted,’ the CBEC said.
‘The fringe benefits are transactions in furtherance of business. Even if supplied without consideration, the same are deemed supply and will attract GST,’ it said.
In a fresh set of clarifications issued in its FAQ section, the CBEC also said that GST will not be levied on rental income of less than Rs 20 lakh a year.
‘However, when the rental income from a single property is less than Rs 20 lakh but the aggregate rental income from various properties exceed Rs 20 lakh, the requirement for registration and GST payment will be there,’ it said.
GST is not chargeable if free replacement is provided by a business to customers without consideration under warranty. Also, goods sent for a demonstration on returnable basis would not be considered supply as there is no transfer of title involved.
But, if some element of service is involved, the same will be a taxable supply, it said.
Equipment and instruments sent to manufacturers’ factory for repairs and calibration within India on a returnable basis would mean no sale has taken place. And challan for movement of goods without supply is to be issued for such items.
Penalties levied on late or delayed payment of loans and advances are also taxable under GST.
The CBEC said GST has to be paid by a job worker on job work charges only. Also, GST would be charged on labour charges in an invoice.
To help taxpayers understand how GST is to be levied, it gave the example of a laptop sold along with a laptop bag.
‘The principal supply is that of the laptop and the bag is an ancillary. Therefore, it is a composite supply and the rate of tax would be that as applicable to the laptop,’ it said.
Recipient of online database access services from a company abroad over the net would have to pay the applicable Integrated- GST (IGST) tax on reverse charge basis.