The Madhya Pradesh Authority of Advance Ruling (AAR) ruled that the GST is applicable on payment of notice pay by an employee to Bharat Oman Refineries in lieu of notice period.
The applicant, M/s Bharat Oman Refineries Limited (BORL) is a Company registered under the Companies Act, 1956 with Registrar of Companies, Gwalior and is carrying on the business of Relining of Crude Oil in the Refinery located at Village Agasod, Bina. District Sagar, Madhya Pradesh. The Bharat Oman Refineries Limited is headquartered at Village Agasod, Bina, District Sagar (M.P.). M/s BORL is a deemed Public Sector Undertaking, as the holding company. M/s Bharat Petroleum Corporation Limited (BPCL) has 51% paid up capital in the company.
This application u/s 97 of the Act seeking Advance Ruling is being made on the determination of liability to pay tax on any goods or services or both and admissibility of input tax credit of tax paid or deemed to have been paid.
The Coram of Manoj Kumar Choubey and Virendra Kumar Jain ruled that GST is applicable on payment of notice pay by an employee to applicant employer in lieu of notice period under clause 5 (e) of schedule II of CGST Act. Premium of Group Medical Insurance Policy recovered by applicant from the non-dependent parents of employees & retired employees will fall within the ambit of supply and is liable to GST.
The AAR further held that as per Section 15(1) of GST Act, the value of supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply where the supplier and the recipient of the supply are not related, and the price is the sole consideration for the supply. However, if the transactions are between related persons then value of supply is to be determined as per Rule 28. The employer and employee are related person as per Explanation to Section 15, and therefore, the valuation of canteen facility provided by applicant to its employees shall be as per Rule 28 and not at the nominal amount recovered by applicant from its employees.
“Applicant-company is liable to pay GST on the amount recovered from its employees towards telephone charges at actuals,” the AAR said.
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