Gift Taxation under GST

Updated on : March 24, 2023 - noon 17 min read.

If you're planning to send a gift to someone, it's important to know about the gift taxation under GST. The Goods and Services Tax (GST) has brought several changes in the tax regime, and gift taxation is one of them. Understanding the gift taxation rules under GST can help you avoid any potential legal troubles and save you from paying hefty fines. In this comprehensive guide, we'll take you through everything you need to know about gift taxation under GST, including the applicable rates, exemptions, and the impact on your tax liability. Whether you're sending gifts to your loved ones or running a business that involves gift-giving, this guide is a must-read for you. So, let's dive in and learn everything about gift taxation under GST together!

Taxation of Gifts under GST

Gifts are a way of expressing love, affection, and gratitude towards our loved ones. However, when it comes to taxation, gifts are considered as a source of income and are subject to tax. In India, the taxation of gifts is governed by the Gift Tax Act, 1958, which has been abolished since 1998. However, gifts received after April 1, 2017, are subject to the Goods and Services Tax (GST) under certain conditions.

Gift Taxation in India

In India, gifts are classified as direct or indirect gifts. Direct gifts are those that are given by an individual to another individual or to a Hindu Undivided Family (HUF). Indirect gifts are those that are received by an individual from a trust or an association of persons (AOP). Direct gifts are subject to tax under the Income Tax Act, 1961, while indirect gifts are subject to tax under the GST Act, 2017.

Gifts under GST

As per the GST Act, gifts are considered as taxable supplies, and the value of the gift is subject to GST. However, gifts up to a value of Rs. 50,000 in a financial year are exempt from GST. If the value of the gift exceeds Rs. 50,000, the entire value of the gift is subject to GST, and the person who is giving the gift has to pay the tax.

For example, if you receive a gift worth Rs. 60,000 from a friend, the entire value of the gift is subject to GST, and your friend has to pay the tax. The rate of tax on gifts is the same as the rate of tax applicable to the goods or services being gifted.

Gifts to Employees

Gifts given to employees by employers are also subject to tax under the GST Act. However, gifts up to a value of Rs. 50,000 in a financial year are exempt from GST. If the value of the gift exceeds Rs. 50,000, the entire value of the gift is subject to GST, and the employer has to pay the tax.

Exemptions from gift tax

There are certain exemptions available for gift taxation under GST. Some of the exemptions are:

Gifts given to a close relative are exempt from GST. Close relatives are defined as spouse, brother or sister, brother or sister of spouse, brother or sister of either of the parents, any lineal ascendant or descendant, or any spouse of the aforementioned persons.
Gifts given to an employee by an employer, in the course of employment, are exempt from GST up to a value of Rs. 50,000 in a financial year.
Gifts received from an employer on retirement or termination of employment are exempt from GST up to a value of Rs. 50,000.

Stamp Duty

Apart from GST, gifts may also attract stamp duty under certain circumstances. In India, stamp duty is a tax that is levied on documents that are used to record transactions. The stamp duty rates vary from state to state, and they are usually a percentage of the value of the transaction.

When a gift is made through a gift deed, stamp duty is applicable. The stamp duty rates for gift deeds also vary from state to state. In some states, there is no stamp duty for gift deeds, while in others, the rates can go up to 8% of the value of the gift.

It is important to note that if a gift is made without a gift deed, stamp duty is not applicable. However, it is always recommended to make a gift through a gift deed to avoid any legal issues in the future.

Conclusion

In conclusion, while gifts are a way of expressing love and affection towards our loved ones, they are also subject to taxation under certain circumstances. Gifts received after April 1, 2017, are subject to GST under certain conditions. Gifts up to a value of Rs. 50,000 in a financial year are exempt from GST. Apart from GST, gifts may also attract stamp duty when made through a gift deed. It is always recommended to seek the advice of a tax expert while making gifts to avoid any tax-related issues in the future.

By Esha Arora

Categories