2021 (10) TMI 328 - AAR - GST

Levy of GST - GST to be paid on Management Fee/Administrative charges only or otherwise complete billing amount - employer portion of EPF ESl amount of the bill are exempted for paying GST or not - HELD THAT - While sub-section (2) of section 15 clearly specifies the elements that will form a part of value of supply, sub-section (3) of section 15 excludes the elements that are not to be included in the value of supply - these provisions of the Act leave no room to deduct any amount like management fee, employer portion of EPF and ESI for the purpose of determination of value of supply under section 15 of the GST Act meaning thereby in the instant case, tax is leviable under section 9 of the Act ibid on the entire billing amount. GST is payable on total value of supply - employer portion of EPF ESl amount of the bill are not exempted for paying GST.

Summary

Issues Involved:
1. Whether GST is payable on the Management Fee/Administrative charges only or on the complete billing amount.
2. Whether the employer portion of EPF & ESI amounts in the bill are exempted from GST.

Issue-wise Detailed Analysis:

1. GST on Management Fee/Administrative Charges vs. Complete Billing Amount:
The applicant, a registered society providing security and scavenging services to government hospitals, charges Minimum Wage + Employer Portion of EPF @ 13% + ESI @ 3.25% and levies GST @ 18% on the gross bill amount. The Audit Authority objected, suggesting GST should only apply to Management Fees/Service Charges. However, the Revenue Officer clarified that the valuation under GST is governed by Section 15 of the CGST Act, which states that the value of supply includes the total transaction value, inclusive of all components except for GST itself. The Authority for Advance Ruling (AAR) concluded that GST is payable on the entire billing amount, not just the Management Fees/Administrative charges, as the entire amount forms the transaction value under Section 15.

2. Exemption of Employer Portion of EPF & ESI from GST:
The applicant argued that since the employer portion of EPF & ESI is deposited to respective authorities, these amounts should be exempt from GST. The Revenue Officer countered this by referencing Section 15(2) of the CGST Act, which includes all components of the invoice in the taxable value except for the GST itself. The Authority noted that the employer’s contributions towards EPF & ESI are part of the total transaction value and must be included in the taxable value. Consequently, these amounts are not exempt from GST. The AAR ruled that the employer portion of EPF & ESI is not exempt from GST and must be included in the taxable value.

Observations & Findings:
The Authority reviewed the submissions and documents provided by the applicant, including tax invoices and work orders. It emphasized that Section 15 of the GST Act clearly outlines what constitutes the value of supply, which includes all charges except for GST itself. The Authority found no legal basis to exclude Management Fees or employer portions of EPF & ESI from the taxable value. The ruling was based on the principle that the entire amount billed, excluding GST, constitutes the transaction value subject to GST.

Ruling:
- Question: Whether GST is payable on Management Fee/Administrative charges only or otherwise complete billing amount?
Answer: GST is payable on the total value of supply, as discussed.

- Question: Whether employer portion of EPF & ESI amount of the bill are exempted for paying GST?
Answer: Answered in the negative.

This comprehensive analysis ensures that the GST is applied to the entire billing amount, including all components such as Management Fees, EPF, and ESI, in accordance with Section 15 of the CGST Act.