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CA Intermediate · Taxation · Supply under GST

Mehta Industries Ltd, Pune, gives each employee a Diwali gift voucher worth Rs 4,000 during the year. For employee Anil, the total gifts during the financial year are Rs 4,000 and he has no other gifts. Mehta Industries claims it is outside GST. Which is the correct view?

The gift is not a supply. Although employer and employee are related persons, Schedule I excludes gifts from the employer to an employee whose value does not exceed Rs 50,000 in a financial year. Rs 4,000 is well below the limit, so no GST is payable on it.

  1. ATaxable, because supplies to employees without consideration are always supplies
  2. BNot a supply, because gifts to an employee not exceeding Rs 50,000 in a financial year are excluded from Schedule ICorrect
  3. CTaxable only if the employee is also a director
  4. DNot a supply, because employer-employee transactions are always in Schedule III

Explanation

Schedule I treats supplies between related persons (including employer and employee) without consideration as supply, but excludes gifts by employer to employee not exceeding Rs 50,000 in a financial year. Rs 4,000 is within this limit, so it is not a supply. Option A ignores this exclusion.

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