The Uttar Pradesh Authority of Advance Ruling (AAR) has held that 18% Goods And Services Tax (GST) is applicable on reimbursement of the cost of emoluments under ‘supply of manpower service’.
The applicant, the Airport Authority of India (AAI), accepted the bid of Adani Enterprise Limited and executed the concession agreement for 50 years for undertaking the operations, management, and development of the Chaudhary Charan Singh International Airport on a public-private partnership basis to bring efficiency in service delivery, expertise, enterprise, and professionalism and to harness necessary investment.
The applicant approached the AAR to know whether GST is leviable on the invoice raised by the Applicant for reimbursement of the salary or staff cost on M/s. Adani Lucknow International Airport Limited.
The Authority observed that the deemed deputation period is not a one-way road to the transfer of business as a going concern, because the employees of AAI may opt or may not opt for employment under the Adani Lucknow International Airport Limited and there may be circumstances in which they do not receive employment offers or they continue their services with the AAI and in this condition they will be redeployed by the AAI and removed from the airport which will be managed and operated by the Adani Lucknow International Airport Limited.
Thus, there is no case for exemption on the reimbursement of emolument of employees to the AAI as services of manpower supply are provided by one distinct entity to another distinct entity where transfer of business as a going concern is not a precondition nor this supply of manpower services is a corollary to the agreement for the transfer of business for the operations management and development of the airport.
The Coram of Mr. Abhishek Chauhan, Member (Central Tax), and Mr. Vivek Arya, Member (State Tax) has held that it appears that reimbursement of the cost of emoluments of employees is a consideration for the supply of manpower service and not for supply of transfer of business as a going concern and hence taxable at 18%.
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