The Tamilnadu State Appellate Authority for Advance Ruling ( AAAR ) held in a recent ruling that amount recovered by an Employer from their Employee in lieu of Equated Monthly Installment ( EMI ) for car-lease facility provided by the Company is not a ‘perquisite’, and is liable to Goods and Services Tax ( GST ).
The Application for Advance Ruling was filed under Section 100(1) of the Tamilnadu Goods and Services Tax Act, 2017/ Central Goods and Services Tax Act, 2017 ( CGST Act ) by Faiveley Transport Rail Technologies India Private Limited (Faiveley Transport), a company involved in the manufacturing, supply and export of equipment including railway door systems, grills for train coaches and braking systems and pantographs for the Rolling Stock Industry.
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The Appeal was lodged subsequent to a decree by the Tamilnadu State Authority for Advance Ruling ruling that GST is applicable on “facility of car extended to the employees of the Applicant-Company in the course of employment”
Faiveley Transport, in the present Application have contended that the facility of car lease provided to employees under the employment contract qualifies to be a ‘Perquisite’ under the Income Tax Act, 1961 and accordingly would be exempt from the payment of GST, due to its inclusion under Entry 1 of Schedule III of the CGST Act.
The two-member Bench of the Tamil Nadu State AAAR comprising Ashish Varma, I.R.S., Central Member and D. Jagannathan, I.A.S., State Member observed that the car-lease amount payable on EMI basis, is initially paid by the Employer who later withholds the same amount from the salary amount paid to the employee availing the car lease facility by means of their contractual agreement.
Upon perusal of the ‘Policy Manual 2024’ furnished by Appellant, AAAR noted that the leased car will be registered in the name of the company who also shall bear the registration, road tax, and annual insurance premium amounts for the leased period, provided that reductions for the same amounts are made from the employee’s monthly salary.
Rebuking the grounds raised by the Appellant, AAAR held that the provision of car-lease cannot be a perquisite as per Section 17(2) of the Income Tax Act, 1961 as a ‘perquisite’ refers to a ‘value’ in monetary terms meted out to the Employee as a benefit in lieu of their employment.
Here, the Employer is a mere facilitator between the car-leasing company and the Employee, proved by virtue of the Applicant’s reclamation of EMI amount for the car lease back from the Employee’s monthly salary.
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In light of the material on record and observations made, AAAR provided clarification on the Order passed by the AAR and rules that only the actual value in monetary terms extended to the Employee concerned in the course of employment shall qualify as a ‘perquisite’ and that the car lease amount recovered in ‘actual terms’ by the Employee is not a perquisite, thus being subject to GST.
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