GST on perquisites under 194R

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Dhruv Gor (Querist)
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06 April 2024 Hello I am a CA final Student,

I had a query that how is a perquisite under 194R of Income Tax act can be classified as a supply under GST. If in a case where perquisite is paid for good business terms for numerous years,then how can such a supply of pequisites in kind be considered as a supply of services.

The recipient of perquisites is not supplying anything excess out of the original business contracts of supply of goods.

Kindly provide me with a solution of the same.

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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07 July 2024 Under the Income Tax Act, perquisites are benefits or amenities provided by an employer to an employee in addition to their salary. These perquisites can include benefits like accommodation, car facility, stock options, etc., and are taxable under the head "Salary" in the hands of the employee.

When it comes to GST (Goods and Services Tax), the concept of supply is broad and covers all forms of supply of goods or services or both. However, not all transactions under income tax laws automatically qualify as supplies under GST. GST defines supply under Section 7 of the CGST Act, 2017, which includes:

1. **Goods**: Any transfer of title or right to use goods.
2. **Services**: Anything other than goods, money, or securities.

Perquisites provided by an employer to an employee generally do not fall within the ambit of GST for several reasons:

- **Nature of Supply**: Perquisites are typically provided as benefits to employees under their employment contract and are not transactions entered into for consideration or furtherance of business. They are usually seen as part of the employment relationship and not treated as a supply made in the course or furtherance of business.

- **Consideration**: GST requires a consideration for a supply to exist. Perquisites provided to employees are generally not considered as being provided in exchange for any consideration that can be quantified in monetary terms as per GST norms.

- **Exclusions**: Schedule III of the CGST Act lists activities or transactions which shall be treated neither as a supply of goods nor a supply of services. This includes services provided by an employee to the employer in the course of or in relation to his employment.

Therefore, perquisites provided to employees under the Income Tax Act are typically not considered as supplies under GST. These are treated separately under income tax laws and are taxed accordingly as perquisites or benefits in kind received by the employees.

For specific cases or if there are unique circumstances where there could be a potential overlap or doubt regarding GST applicability, consulting with a tax expert or GST consultant would be advisable to ensure proper compliance with both Income Tax and GST regulations. They can provide guidance based on the specific facts and applicable laws.