Applicability of GST on Transportation Facility provided by the Employer to the Employees – AAAR Haryana
by ReinHeads Team | Apr 20, 2022
AAAR Haryana – Applicability of GST on Transportation Facility provided by the Employer to the Employees
- Beumer India Pvt. Ltd. (‘the Appellant’) hired motors vehicles on contract basis for providing transportation facility to its employees in accordance with their HR policy, either at a nominal cost for air conditioned vehicles or free of cost (in other cases)
- The Appellant sought an Advance Ruling with respect to levy of GST on the transportation facility provided by the Appellant to its employees
- The Authority for Advance Ruling (‘the AAR’) ruled that GST is payable on the transportation services rendered by the Appellant under the Central Goods and Services Tax Act, 2017 (‘CGST Act’) and the valuation of such services shall be in accordance with Section 15 of CGST Act
- Being aggrieved by the ruling of the AAR, the Appellant filed an appeal before the Appellate Authority of Advance Ruling, Haryana
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| Issues before the Appellate Authority for Advance Ruling (‘the AAAR’) |
- Whether GST is payable on transportation facility provided by the Appellant as employer to its employees for travel between predefined location to its office on free of cost basis, i.e. without any recovery being made from them. If yes, what would be taxable value of the said transaction?
- Whether GST is payable on the recovery of nominal amount for air-conditioned transportation facility. If yes, what would be the taxable value of the said transaction?
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| Discussion and Findings |
The AAAR made the following key observations in respect of the aforesaid issues :
- Transportation facility provided to the employees is not covered under the activities prescribed for CSR and, therefore, the same shall not be considered as a mandatory obligation for the employer as per the Company Law provisions
- The CBIC vide Press Release dated 10.07.2017 clarified that the transactions which are executed in the course of contractual obligation under the employment contract are beyond the scope of GST
- Under the Income Tax Law, the perquisites in form of transportation facility provided to employees for commuting to and from office is not considered as a component of salary
- In the instant case, transport facility is optional for employees and there is no equivalent provision of service for non-opting employees. Therefore, it is not a contractual obligation of the employer under the contract for employment
- Employer and employee are related parties as per GST Law and any activity undertaken between the related parties are treated as supply even if they are made without consideration. However, gifts provided by employer to the employee upto the value of 50,000 in a financial year are not treated as supply
- In light of the same, the AAAR held that the provision of transport facility by the Appellant is exclusive of the contractual obligation of the employer in the course of employment and, therefore, liable to GST on value of transport facility over and above 50,000 for each employee in a financial year. The taxable value shall be determined in accordance with section 15 of the CGST Act and rules made thereunder
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*Order of Appellate Advance Ruling Authority No. HAAAR/2020-21/11 dated 31st March 2022 (The Appellate Authority for Advance Ruling, Haryana) |
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