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CA Intermediate · Taxation · Supply under GST

Mehta & Co., a registered firm in Pune, has an employee, Ravi, who is given a gift of Rs. 18,000 (including GST) on Diwali by the employer. Separately, Mehta & Co. pays Ravi salary under a contract of employment. Which of the following is correct under the CGST Act, 2017?

Salary is outside the scope of supply because Schedule III covers employee services in the course of employment, and the Rs. 18,000 gift is not a supply because gifts to an employee up to Rs. 50,000 in a financial year are not treated as supply under Schedule I.

  1. ASalary is a supply of service by the employee to the employer, and the gift is exempt as it is below Rs. 50,000
  2. BNeither salary nor the gift is a supply; salary for employment is outside supply under Schedule III, and the gift of Rs. 18,000 is a supply because it exceeds Rs. 50,000 in value
  3. CSalary is outside supply under Schedule III, and the gift of Rs. 18,000 is not a supply because gifts up to Rs. 50,000 in a financial year to an employee are not taxableCorrect
  4. DBoth salary and gift are supplies since the employer receives services from the employee

Explanation

Services by an employee to the employer in the course of employment are in Schedule III and are neither supply of goods nor services. Schedule I covers gifts by an employer to an employee only when the value exceeds Rs. 50,000 in a financial year. Rs. 18,000 is below the limit, so no supply arises.

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