GST not Leviable on Provision of Transportation and Canteen Facilities through Third Parties to Employees as per Contract: AAR [Read Order]

GST - Transportation - Canteen Facilities - Employees - Contract - AAR - taxscan

The Authority for Advance Rulings (AAR), Gujarat bench has held that GST is not leviable on the provision of transportation and canteen facilities through third parties to the employees as per the contract.

The applicant, M/s SRF Limited, is a multi-business chemicals conglomerate engaged in the manufacturing of industrial and specialty intermediates. The applicant’s business portfolio covers fluorochemicals, specialty,’ chemicals, packaging films, technical textiles, and coated and laminated fabrics.

The applicant has submitted that it provides canteen facilities to the employees of the company, the applicant has entered into contract with 3rd party service vendor, i.e, M/s Shashi Catering Services Private Limited.

The applicant contended that the service of bus transportation is being provided to the employees of the company and not by the applicant to its employees; as a part of its HR policy, merely arranging for bus transportation facility at a subsidized nominal rate for the comfort and ease of its employees; bus transporters are raising monthly invoices along with GST thereon to the Applicant and a small portion of such charges are being recovered by the Applicant from its employees as per internal HR policy.

State Member Milind Kavatkar and Central Member Amit Kumar Misra held that since this is neither the business of the Applicant nor Applicant in the impugned case is providing Bus Transportation services, this recovery, as per the applicant’s interpretation of the law, also does not qualify as ‘supply’ in order to be covered under the ambit of GST law.

The bench observed that as per the contract with the transporter gross value of bills was raised by the transporter on the applicant. The applicant company as per its HR policy recovered the partial amount from the employees and the remaining amount is borne by the applicant.

Concluding the order, the bench held that the applicant is providing transport and a canteen facility to its permanent employees (on payroll) as per contractual agreement between employer-employee relationships. We find that CBIC vide Circular No. 172/04/2022-GST dated 06-07 -22 has issued the following clarification on the issue of whether GST is leviable on the benefit provided by the employer to its employees in terms of the contractual agreement entered into between the employer and the employee.

“The Provision of Services of transport and canteen facility to its employees is as per the contractual agreement between the employee and the employer in relation to the employment. As cited in the above-referred provisions of scheduled III and the clarification issued vide Circular No. 17210412022-GST dated 06-07-22, the provision of the services of transportation and canteen facility cannot be considered as supply of goods or services and hence cannot be subjected to GST,” the bench said.

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