GST may lead to salary restructuring for you as an employee: View
If the service of providing food can be considered as supply, the employer can surely be considered as a Supplier under the GST act.
Does your employer give you free food or food at concessional rates as part of your salary package? Then, you may be in for some change in your monthly credits!
In a recent order issued by the the Authority of Advance Ruling, when your employer is providing you food and then recovering the same from you by deducting it from your salary, it can be considered to be an outward supply and will attract GST. However, the rate of GST is yet to be confirmed.
The baseline is, the company is incurring expenses like the cost of vegetables, groceries, cook charges and like to provide this service to you and the company doesn't provide these canteen services as a business activity. Usually this is due to a statutory requirement (As per factories act, for a company with number of employees over 250, providing canteen facility is must).
At this point it is good to know that in the pre-GST period there was an exemption to the services provided in relation to serving of food or beverages by a canteen maintained in a factory covered under the Factories Act, 1948 including a canteen having the facility of air-conditioning or central air-heating at any time during the year.
Providing food is like a supporting activity for the main business as per the GST act and can be considered as an supply as such supply or service is-for cash, deferred payment or other valuable consideration. In your case, the consideration is the recovery from your monthly salary.
So, when providing food to employees can be said to be a business and the service of providing food can be considered as supply, the employer can surely be considered as a Supplier under the GST act.
With a possible increase of compliances and tax payments your employer may cut GST from your monthly salary or maybe you could be lucky to have an increased CTC to meet these tax payments.
You may also keep in mind based on the above ruling, you can be prepared for GST implications on other reimbursements that your employer offers like the house rentals, travel, uniform, books, medical expenses and like.
With the beginning of this financial year, FY 2018-19, get talking to your HR and plan your compensation right!
The author is founder & CEO, ClearTax