GST Impact on Salaried People

GST will be relevant for salaried people because they will now pay GST on almost all their expenses - restaurants, movies, shopping, consulting, and construction…basically everything. Depending on the rate of GST, their expenditure on these products may rise or fall.

What will definitely change for salaried people is that their purchases will now be simplified and they would only look for GST on everything that they spend - better than having to deal with hundreds of other taxes on all purchase bills, like entertainment tax, luxury tax, service tax, VAT etc. Everything gone in a spoof and replaced with GST.

GST does not apply to salary or other cash payments. There is also a specific exemption in the second schedule of the GST Bill 2014 which states that any contribution made to a pension, provident fund or social security fund shall not be treated as a supply of goods or services. Therefore contributions to EPF, SOCSO and similar organisations will not be subject to GST.

Employee benefits includes any goods (mobile phones, computers , food, drinks etc.) or services provided free to employees which include any right, privilege, service or facility provided free of charge to employees and examples are leave passage, accommodation, transport, meals, bus passes, meal vouchers, retirement gifts, long service gifts, prizes at annual dinners etc. Employee benefits also cover benefits given by a third party on behalf of the employer to the employee: e.g. a supplier provides free goods or services to an employee on behalf of the employer.

Money and any monetary awards given to employees in the form of salary or a cash allowance are not subject to GST as money is neither a good nor a service.

The value of any goods provided free to employee but not covered by the contract of employment or the gift rule, will be based on the open market value.