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Companies may have to restructure their compensation package to tackle GST's impact

Companies may have to restructure their compensation package to tackle GST's impact

Companies may have to restructure their compensation package to tackle GST's impact
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By CNBC-TV18 Apr 16, 2018 9:57:24 AM IST (Published)

Experts are advising companies to ask HR departments to examine the issue after a ruling by the Authority for Advance Rulings in a case related to canteen charges.

In order to overcome the complications created by the introduction of Goods and Services Tax (GST), companies in the country may now have to restructure their compensation packages and human resource benefits for employees, a report in The Economic Times said.

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This development comes after it emerged that benefits such as reimbursements on home rentals, medical coverage etc. could face taxation under the new system, ET reported on Monday
According to the report, experts are advising companies to ask HR departments to examine the issue after a ruling by the Authority for Advance Rulings in a case related to canteen charges.
It is now felt that the AAR ruling that canteen charges recovered from an employee would be liable to GST may now be taken as a precedent in future cases. Further, this could prompt employers to stop charging for services in order to save on that levy.
“There are various recoveries that corporates make from their employees, which could be impacted by the recent AAR decision,” MS Mani, of Deloitte Haskins & Sells LLP was quoted saying in the report.
However, experts have warned that even if no charge is recovered from employees, companies may still have to pay GST on full value for services provided at concessional rates.
“Employer-employee relationship is treated as that between related parties under GST and therefore these services will be liable to GST on whatever is the applicable open market value,” Bipin Sapra, partner, EY, was quoted saying.
This in turn means that the open-market value will need to be imputed for services provided and tax paid.
 
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