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2020 (3) TMI 1322 - AAAR - GSTClassification of supply - supply of services or not - amount recovered from the employees towards car parking charges payable to Shanti niketan Properties Private Limited (building authorities) - valuation of the supply - pure agent or not - input tax credit on supply of car parking services to employees. Interpretation of the word 'easement' - HELD THAT - In common parlance the word easement is defined as a right to cross or otherwise use someone else's land for a specified purpose - The appellant is providing right to its employee's to use parking facility on the parking space provided by the building authority and for this work they are collecting certain amount from their employee. Accordingly, the activity in question, provided by the appellant, is squarely falls under the Schedule II i.e. Activities to be treated as Supply of Goods or supply of Service of the CGST Act, 2017. Whether the service provided by the appellant would be in the nature of pure agent ? - what Would be the value for the purpose of tax liability? - HELD THAT - The Authority of Advance Ruling, Maharashtra, in the case of M/s. DRS Marine Services Pvt. Ltd. 2018 (12) TMI 893 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA , has observed that, Applicant will be acting as a pure agent of RMS in as much as the entire amount received by them as Crews' Salary will be disbursed to the Crew and no amounts from the said receipt will be used by the Applicant for his own interest - In the instant case also, it is observed that the appellant has contended that they are transferring the entire amount collected, from their employees towards parking charges, to the Building Authorities. Accordingly, the value of the services in the present case will be NIL, as the appellant is providing the same in the capacity of a Pure Agent, subject to the fulfillment of the conditions prescribed for Pure Agent . Input tax credit against supply of car parking services to employees - HELD THAT - Though the activity undertaken by the appellant is a supply of service, in terms of Section 7(1) of the CGST Act 2017, however the value of the service would be nil, as the appellant is acting in the capacity of Pure agent for their employees, subject to the fulfillment of conditions. Accordingly the question becomes redundant.
Issues Involved:
1. Whether the amount recovered from employees towards car parking charges payable to the building authorities is deemed as "Supply of service" by the appellant to its employees. 2. If deemed as "Supply of service," whether the value of such supply would be NIL, being provided in the capacity of a "Pure Agent." If not NIL, what would be the value of such supply? 3. If GST is payable on the amount recovered from employees, whether the GST paid by the appellant to building authorities towards car parking charges would be admissible as input tax credit against the supply of car parking services to employees. Issue-wise Detailed Analysis: 1. Supply of Service: The appellant contended that the facilitation of parking spaces between its employees and the Building Authority does not amount to supply of services under the CGST Act, 2017, as it is not in the course or furtherance of their primary business of software development. The appellant cited Section 7(1) of the CGST Act, which defines "Supply" to include all forms of supply of goods or services made for a consideration by a person in the course or furtherance of business. They argued that their activity does not qualify as a supply because it is not related to their primary business activity. However, the authority observed that the appellant is providing a right to its employees to use parking facilities, which falls under Schedule II of the CGST Act as a "Supply of Services." The term "easement" was interpreted to mean a right to use someone else's land for a specified purpose, which in this case is the parking space. Therefore, the activity of facilitating parking spaces is deemed as a supply of service. 2. Pure Agent and Valuation: The appellant argued that if the facilitation of parking spaces is considered a supply, then the value of such supply should be NIL as they act as a "Pure Agent." They referred to Rule 33 of the CGST Rules, which outlines the conditions for qualifying as a pure agent. The appellant claimed that they fulfill all the conditions: they act on authorization from employees, separately indicate the payment in invoices, and do not use the procured services for their own interest. The authority agreed with the appellant's contention, provided the conditions for a pure agent are met. They noted that the appellant obtains parking facilities on the authorization of employees, the payment is separately indicated, and the services are in addition to their own services. Therefore, the value of the supply would be NIL, subject to the fulfillment of the conditions prescribed for a pure agent. 3. Input Tax Credit: The appellant contended that if the recovery of parking charges is deemed taxable, then the GST paid to the Building Authority should be available as input tax credit. However, since the value of the supply is determined to be NIL, the question of input tax credit becomes redundant. The authority observed that though the activity is a supply of service, the value being NIL means no GST is payable, and hence the question of input tax credit does not arise. Ruling: 1. The amount recovered from employees towards car parking charges payable to the building authorities is deemed as "Supply of service" by the appellant to its employees. 2. The value of the supply would be NIL, subject to the fulfillment of the conditions prescribed for a pure agent by the appellant. 3. As the second question is answered in the negative (value being NIL), the question of input tax credit becomes redundant.
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