Soon after the implementation of the Goods and Services Tax Act, the businesses of all dimensions started adopting the effective ways to avoid the taxation hassle. Due to the repetitive appeal of the government to register under the Goods and Services Tax Act, more than 10 million businesses registered under the regime. The most important fact to notice about the Indian market is its spectacular expansion. And the fundamental factor that adds up to the Indian market’s expansion is the growth of MSMEs. However, these micro, small, and medium-sized businesses, have been facing some teething troubles since the implementation of GST.
And now that the government has fully-implemented new additional measures like the e-way bill in the regime, the troubles for the businesses has increased. The businesses, especially the small ones, would have to restructure the human resource strategies in order to do error-free taxation. It’s a well-known fact that the government is focused to couple GST with everything that is, or could be made taxable. That’s why most of the businesses, providing the benefits to the employees, might get affected as the government will implement GST on:
- The landline charges or telephone bill.
- The medical premiums.
- The allowances for health check-ups.
- Free uniforms and accessories.
- The issuance of Id-cards.
The Indian taxpayers and businesses could run to the Authority for Advance Rulings for the simplification of the tax-liabilities if in case there’s any doubt. Suppose you have a grievance related to the income tax liability imposed by the government, then you can file a request to AAR. In such case, the Authority for Advance Rulings would become your taxation-guide. It will also form regulations for your business that will be authoritative and easily applicable. These regulations, once authorized, will become your company’s as well as the tax authority’s policy-guide.
Now the AAR has made the canteen facilities available to the employee liable for the Goods and Services Tax. Hence, in the wake of the recent development, the HR department of the company should find an effective way to use GST credit calculator. This way you could avoid the new rule’s impact on the remuneration of the employee.
How will the remuneration be affected?
Since a company always takes a decision keeping in mind the broader perspective of the profit or loss, one must expect it to do the same in the case of employer-to-employee supplies. Now if you, as a company, charge the employees for the food and other facilities, then those transactions will attract GST. Hence, in order to avoid that levy, the companies would stop charging the employees but would be bound to:
- Reshuffle the remuneration packages of the employees.
- Change the HR policies of the company.
The technology has long been playing a vital role in the stabilization of the indirect tax regime in India. Hence, if a company faces the tax complications even after making the changes in the HR policies, GST tool could be an effective way to streamline the process further.
The taxation impact to be hauled on to the employees
The government has decided to levy this additional GST on the companies as per the open-market values. This will keep the process fair and would invite no valuation disputes in the company. However, if a company faces any compliance issues, then it could either take the assistance of GST credit calculator or have its taxation processes planned by AAR. And as both of the processes are bound to the law, you wouldn’t have to worry about the litigations.
The relationship between the company and the employee revolves around a lot of direct and indirect benefits. The companies have long been charging the employees on the off-record basis. The deduction made for the facilities like food and transportation would now strangle the employees with the GST wire. Because in order to avoid the taxation mess, the companies would stop charging for the additional meal plans. And according to the rules, the burden would still fall on the employee’s shoulders.
The GST has created its impact on almost all of the businesses throughout the nation. However, the impact of GST on the canteen services falling entirely on the employees seems a bit unfair. The government should formulate a provision under which an employee is relieved of the additional GST charges on the canteen services. However, the government has been trying to improve the compliance-related issues but has also overlooked the impact GST creates on the businesses. Although, the businesses could seek for the guidance of AAR and pre-plan the income-tax strategies. This way both the businesses and their employees would be able to avoid the unnecessary load of the Goods and Services Tax Act.