The Rajasthan bench of Authority for Advance Ruling (AAR), after examination of all conditions and considering the nature of supply, ruled that the invoice raised by the Applicant for reimbursement of the salary/ staff cost on M/s. Adani Jaipur International Airport Limited is a consideration for supply which falls under the ambit of manpower service and hence taxable at the rate of 18% Goods and Services Tax (GST).
In accordance with Section 12A of the Airport Authorities of India Act (AAI Act), the Airports Authority of India (AAI) called for bids to operate, manage, and develop a number of AAI airports through a public-private partnership in order to increase service delivery efficiency, leverage necessary funding, and demonstrate expertise.
After evaluation of the bids received from the bidders and receipt of approval of GOI, the applicant accepted the bid of Adani Enterprise Limited and issued a letter of Award dated 01.09.2020 which required Adani Enterprise Limited to execute the concession agreement through a special purpose vehicle.
Adani Enterprise Limited has promoted and incorporated a special purpose vehicle as “Adani Jaipur International Airport Limited” (“Concessionaire”) under Companies Act 2013 and in accordance with the terms of Request for proposal (“RFP”).
The advance ruling was sought on the GST rate on reimbursement of the salary or staff cost from the Concessionaire to the AAI.
The authority observed the clause 6.5 of the agreement defines deployment and emoluments of the staff of the AAI in relation to the new system to be adopted. For example Para 6.5.3 (ii)
says “It is clarified that the Concessionaire shall not be liable to bear any costs in respect of the Senior Personnel, rather than it shall be borne entirely by the Authority”.
Furthermore, these personnel, as per para 6.5.3(i), on the expiry of such 3 month period shall be transferred out of the airport and redeployed by the Authority. Hence in this regard there is no case of GST on payment of salary. But the para 6.5.4 says that the Concessionaire shall bear the Select Employee cost of the Joint Management period and Deemed Deputation period.
Further observed the points of agreements that payment of salary or emoluments of staff is onus of applicant i.e. AAI. The M/s. Adani Jaipur Internatiönal Airport Limited (SPV) from paying emoluments to the manpower which is engaged in providing their services in operation of the airport and this manpower can demand or and will receive their emoluments from the AAI only. Further, AAI will receive interest on delayed payment of reimbursement.
The panel of Umesh Kumar Garg (Member – Central Tax) and Mahesh Kumar Gowla (Member – State Tax) observed that the emoluments received by the AAI form a part of services by transfer of outgoing concern. It seems the supply of manpower services by AAI to the M/s. Adani Jaipur International Airport Limited (SPV).
The bench stated that there is no case for exemption on the reimbursement of emolument of employees to the AAI as services of manpower supply is 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 transfer by outgoing concern for the operations management and development of the airport.
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