Gain Share and GST
Dilpreet Singh 24 Jan 2020

Gain Share and GST

Gain Share

Gainsharing is a management system used by a company to boost profitability by motivating employees to improve their performance through engagement and participation. Employees share in the gain (improvement) financially as their performance improves. The aim of Gainsharing is to improve performance and eliminate waste (time, money, and materials) by empowering employees to work more intelligently as a team, rather than just alone.

Not to equate gain sharing with profit sharing. Gainsharing and profit sharing vary in many aspects. Often known as Gain Sharing, Gainshare, and Gain Share It could also be called "gains sharing." In other words, a company shares the savings from improved performance with its workers.


The GST is an indirect federal sales tax applied to the purchase of certain goods and services. The business adds GST to the product's price, and a customer who purchases the product pays the selling price plus GST. The portion of GST is received by the company or seller and is forwarded to the government. It is also known in some countries as Value-Added Tax (VAT).

Gainshare not a part of GST

GST applies to "Supplies" of goods and services. The term "supplies" is defined in Section 7 of the Central Goods and Services Tax Act,2017 ("CGST Act"), which includes transactions for consideration purposes. However, transactions are treated as supplies in the cases referred to in Schedule I to the CGST Act, even if the consideration is absent which includes supplies between related persons when such supplies are made in the course of business or in the continuation of business.

In this context, the clarification to Section 15 of the CGST Act which provides that employer and employee shall be deemed to be "connected persons". Accordingly, employer suppliers to workers would be liable to GST even if these deliveries are rendered without consideration as they are considered to be associated persons (except for gifts up to Rs 50,000 stated at the end of this Article).

Nevertheless, Schedule III of the CGST Act states that "the employee's services to the employer in the course of or in relation to his jobs" will not be regarded as the provision of goods or services and therefore GST does not apply to services rendered to the employer by the employee, provided that they are in the course of or in relation to the job.

Transactions that are excluded from the tax levy for transactions between employee and employer are therefore:-

1. Provision of an employee's services to the employer during the course of the job.

2. Employer gifts to the employee in a Financial Year not exceeding Rs 50,000.

Did you find this write up useful? YES 1 NO 0
prithvi chauhan   25 Jan 2020 12:26pm
Brief and brilliant!!

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