GIFT & GST

 

It is important to understand and identify the thin line of difference between gift and disposal to better understand the implications under GST.
 
Section 122 of TOPA defines Gift to mean a transfer of property made voluntarily and without consideration (a "Gratuitous" Act). In the context of employer and employee, gifts could include Diwali hampers, birthday presents, marriage gifts and the like. Whereas if anything is given to an employee as part of a contractual obligation which may or may not directly be related to his performance, viz., laptops given to all the employees who complete three years in the organization, mobiles presented on achieving prefixed targets and the like may not be at par with gifts.

 
In the above context, possible GST implications on transfer of goods to employee either as a gift or in any other form is as under:
 
1. Assets given as gift:
A. <= 50,000 value:
i. This shall get covered under proviso to Entry 2 of Schedule-I , and shall not be treated as supply for the purpose of GST. Therefore, does not attract any output tax .
ii. ITC claimed on such assets must be reversed as per Section 17(5)(h) for disposal by way of gifts.
 
There is no excuse from reversal of ITC claimed on such gifts just by paying output tax under Entry 1 of Schedule-I. The phrase "where Input tax credit has been availed" appearing in entry 1 to Schedule-I has to be legally available.
 
B. >50,000 value:
i. Entry-2 of Schedule-I is attracted - tax to be paid as outward supply.
ii. Reversal of ITC under Section 17(5)(h) is also warranted as the same is disposed by way of gift.
iii. Reversal of ITC means that ITC on such goods was never claimed, hence, provisions of Section 18(6) is not applicable.
 
2. Assets given as a contractual obligation:
A. Entry 2 of Schedule-I is attracted - tax to be paid as outward supply. If such goods are put to use before supplying to the employee, provisions of Section 18(6) would also get attracted.
B. Since it is not a gift, ITC on the same is eligible