2020 (11) TMI 1055 - AAAR - GST

Levy of GST - transportation facility provided by the employer (Applicant) to its employees for travel between predefined location to its the office, free of cost - recovery of nominal amount on account of air conditioning facility for transportation facility provided by the employer (Applicant) to its employees for travel between predefined location - taxable value of the transaction - HELD THAT - It is observed that the Press Release dated 10.07.2017 very lucidly clarifies that transactions in the course of contractual obligation between employer and the employee are beyond the scope of GST. The same is very well reliable where employer-employee relation is in place and any service by the employer needs to be examined for leviability under GST. The same aptly provides that since service by an employee to the employer is outside the purview of GST, it follows that so will be the supply by the employer to the employee made in terms of the contract of employment. Thus, the transportation facility is exclusive of the contractual obligation of the employer in the course of employment - Also, the circular mentioning that services of providing membership of a 'club1 or of a 'health or fitness centre' to employees is not subject to GST when provided free of charge to 'all' the employees, indicates that provisioning has to be under contractual agreement of employment. The provisioning of transport facility provided by the Appellant is exclusive of the contractual obligation of the employer in the course of employment. The same shall be liable to GST, on a value that exceeds the total gift value up to ₹ 50000/- given by the Appellant to an employee availing this facility in a financial year.

Summary

Issues Involved:
1. Whether GST is payable on the transportation facility provided by the employer to its employees free of cost.
2. Whether GST is payable on the recovery of a nominal amount for air-conditioned transportation provided by the employer to its employees.
3. Whether the transportation facility provided falls under the definition of consideration.
4. Whether the transportation facility is a part of the employer's Corporate Social Responsibility (CSR).
5. Whether the transportation facility provided is in furtherance of the employer's business.
6. Application of the CBIC's press release dated 10.07.2017.
7. Comparison with the Advance Ruling in the Tata Motors Ltd. case.
8. Determination of the valuation of the transportation facility under Section 15 of the CGST/HGST Acts.

Comprehensive Analysis:

1. GST on Free Transportation Facility:
The Authority for Advance Ruling (AAR) ruled that the transportation facility provided by the employer to its employees free of cost is taxable under the provisions of the HGST/CGST/IGST Acts. The valuation of such services is to be determined under Section 15 of the CGST/HGST Acts.

2. GST on Nominal Recovery for Air-Conditioned Transportation:
The AAR also ruled that the transportation facility provided by the employer to its employees for a nominal amount due to air-conditioning is taxable under the provisions of the HGST/CGST/IGST Acts. The valuation of such services is to be determined under Section 15 of the CGST/HGST Acts.

3. Definition of Consideration:
The appellant argued that the transportation facility provided free of cost or against nominal recovery does not fall under the definition of consideration. However, the AAR concluded that the element of consideration is present in the applicant's case, making such services taxable.

4. Corporate Social Responsibility (CSR):
The appellant claimed that providing transportation facilities to employees is part of CSR activities. However, the appellate authority found that this activity does not fall under CSR as per the Companies Act, 2013. The relevant sections and Schedule VII of the Companies Act were examined, and it was concluded that transportation facilities for employees are not covered under CSR activities.

5. Furtherance of Business:
The appellate authority observed that the transportation facility is provided to ensure smooth attendance of employees, which serves the employer's business motives. Therefore, it is in furtherance of the employer's business and is taxable under GST.

6. CBIC's Press Release dated 10.07.2017:
The appellant relied on the CBIC's press release, which states that services provided by the employer to the employee in terms of contractual agreement are not subject to GST. However, the appellate authority noted that the transportation facility is exclusive of the contractual obligation of the employer in the course of employment and is provided to suit business requirements, making it taxable.

7. Comparison with Tata Motors Ltd. Case:
The appellant cited the Advance Ruling in the Tata Motors Ltd. case, where it was ruled that no GST is applicable on the transport facility provided to employees. However, the appellate authority found that the facts of the Tata Motors Ltd. case were different and not applicable to the present case.

8. Valuation under Section 15 of CGST/HGST Acts:
The appellate authority upheld the AAR's ruling that the valuation of the transportation facility provided by the employer to its employees should be determined under Section 15 of the CGST/HGST Acts. The ruling also clarified that the transportation facility provided is not a component of the employee's salary and is not covered under the employer's contractual obligation.

Ruling:
The appellate authority concluded that the transportation facility provided by the employer to its employees is exclusive of the contractual obligation of the employer in the course of employment and is in furtherance of the employer's business. Therefore, it is liable to GST on a value that exceeds the total gift value of ?50,000 given by the employer to an employee in a financial year. The transactions executed in the course of the contractual obligation of an agreement of employment are beyond the scope of GST as clarified in the CBIC's press release dated 10.07.2017.