No GST Applicable on Salary Reimbursements Says Central Government

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August 7, 2019

GST on Salary

GST Impact on Salary: Since its inception, the GST has had to go through regular periodic reviews and changes. In a diverse demographic country like India with a minuscule formal sector, the new indirect tax regime was bound to be met with frowning as well as surprised eyes. Touted as the necessary bitter medicine for the indirect tax dependent Indian Economy, there were concerns that GST will also affect the reimbursements availed by working salaried professionals.

However, the government has refuted this and denied even considering such step. With this, the Center has put all speculations regarding salary reimbursements being brought under the GST ambit to rest.

The Governments clarification comes amidst reports in media about companies preparing for major changes in the salary package of their employees due to the increased GST burden on companies. It was being reported that the break up of house rent, mobile and telephone bills, health insurance, medical bills, transportation like salaries can come under the GST ambit.

These reports were running on the backdrop of a resolution given by AAR in a special case. The AAR stated that any deduction of the employee’s salaries in the name of Canteen Charges by the companies would attract GST.

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No GST on Salary Paid to Private Sector Employees

Currently, the companies are following the model of CTC i.e cost to the company in which the company includes all the benefits given to the employees within the structure of the salary. But if the GST was to be applied on the CTC than it might give the companies a chance to modify their salary structure accordingly so that the companies may avoid the extra burden of taxes applicable thereafter.

The Government has strongly refuted such claims and stated that no GST will be levied on salary reimbursements. In addition to CTC, other reimbursements like house rent, telephone bill, additional health insurance, health check-up, gym etc.

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