Risk and losses due to Employee reimbursement.

In any organization, Employee reimbursement is very common and the process is also user friendly. The employee first spent from his pocket based on company policies and his manager consent and then claims the same from the company by submitting the invoices. In the beginning, the purpose was limited only to food and conveyance but later on, the scope extended like training fees, online courses and online purchases of small items etc. The managers find the process of Employee reimbursement very smart & effective as it reduces the time of making purchases and payments which generally will take more time when it routes through normal vendor process.

Today I will discuss not the advantage of Employee reimbursement but the disadvantage. The managers should know the risk and losses which their organization have to face due to the Employee reimbursement.

In the case of domestic purchases, the invoices were raised in the name of the employee and not in the company and accordingly the vendor issue a B2C invoice and not B2B invoice. Due to this, the company losses the GST input credit which was maybe 12% to 18%.  The managers should consider the input loss while making their purchase decision.

We are now in the digital era and it's very easy to purchase any goods and services from any part of the world by way of online payment.  The managers should know that anyone including employees who are purchasing any overseas services liable to pay TDS and GST in our country. There is no minimum amount and the same is being applied even for small purchases of services. It has been noticed that employees are taking online training by making overseas payments from their credit card and then claim the same from their company as reimbursement.  The company also reimburse the same as domestic payment and don't pay GST and TDS. This will be a loss to the country exchange and hence the company has done non-compliances by not paying GST and TDS and hence require to face the consequences for being a defaulter.

 Thus, there is a need to discourage overseas payment directly by employees and the company should bring in their policies.