The Gujarat Appellate Authority for Advance Ruling ( AAAR ) has affirmed that Emcure Pharmaceuticals Limited is not required to pay Goods and Services Tax ( GST ) on free bus transportation provided to its employees.
M/s. Emcure submitted that the canteen and bus transportation facilities are integral to its employment terms and provided in accordance with its Human Resources (HR) policy. The company recovers a subsidized portion of the cost for these services as part of its factory operations, in line with the HR policy.
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The department argued against the AAR ruling in appeal, stating it did not explicitly exempt GST for third-party bus transportation providers. It also contended that Emcure could not seek a ruling on behalf of external service providers.
The AAAR rejected the department’s appeal, maintaining that GST is not applicable to the portion of canteen charges recovered from employees by M/s. Emcure and remitted to the canteen service provider. Furthermore, it confirmed that GST is not chargeable on the free bus transportation facility offered to employees.
However, the bench clarified that Input Tax Credit (ITC) on GST paid for canteen services is inadmissible under Section 17(5)(b)(i) of the CGST Act. ITC is, however, permissible for GST paid on the hire of buses with an approved seating capacity exceeding 13 persons, used for employee transportation.
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The AAAR clarified that the free bus transportation facility constitutes a perquisite provided to employees as part of their contractual employment agreement. Since this service is rendered in the course of employment, it is not subject to GST when aligned with the employer-employee contract.
The decision, delivered by a bench comprising Rajeev Topno and B.V. Siva Naga Kumari, upheld an earlier ruling by the Authority for Advance Ruling (AAR).
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