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2025 (1) TMI 464 - AAAR - GST
Levy of GST - recoveries made by the Applicant from the employees for providing canteen facility to its employees - free of cost bus transport facilities provided by the Applicant to its employees - Exemption under the Sl. No. 15 of N/N. 12/2017 Central Tax (Rate) dated 28 June 2017 - admissibility of input tax credit to the Applicant for the GST charged/paid to the vendors on procurement of such services in terms of Section 16 of CGST Act, as the same are used in relation to furtherance of business. Levy of GST - recoveries made by the Applicant from the employees for providing canteen facility to its employees - free of cost bus transport facilities provided by the Applicant to its employees - Exemption under the Sl. No. 15 of N/N. 12/2017 Central Tax (Rate) dated 28 June 2017 - HELD THAT - The respondent has arranged free of cost transportation facility to its employees in non -AC bus, which is provided by a third party vendor, as a part of its HR policy and as per employment agreement. These facts are not in dispute. The perquisite of providing free bus transportation by the respondent to their employee in terms of contractual agreement entered into between the respondent and their employee are in lieu of the services provided by employee to the employer in relation to his employment and will not be subjected to GST when the same are provided in terms of the contract between the employer and employee. M/s. Emcure respondent is not liable to pay GST on free bus transportation facility provided to its employees. Admissibility of ITC - HELD THAT - ITC is admissible for transportation services with a seating capacity of more than 13 persons. Conclusion - Respondent is not liable to pay GST on free bus transportation facility provided to its employees. ITC is admissible for transportation services with a seating capacity of more than 13 persons.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
- Whether the recoveries made by the Applicant from the employees for providing canteen facilities are taxable under the GST laws.
- Whether the free of cost bus transport facilities provided by the Applicant to its employees are taxable under the GST laws.
- Whether the Applicant would be exempted under the Sl. No. 15 of Notification No. 12/2017 - Central Tax (Rate) dated 28 June 2017, if GST is applicable in respect of employee recovery towards bus transportation facility.
- Whether input tax credit (ITC) is admissible to the Applicant for the GST charged/paid to the vendors on procurement of such services in terms of Sec 16 of CGST Act, and if yes, would the same be restricted to the portion of cost borne by the Applicant.
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Taxability of Canteen Facility Recoveries
- Relevant Legal Framework and Precedents: The CGST Act, 2017 and GGST Act, 2017 provisions concerning supply and taxability.
- Court's Interpretation and Reasoning: The court held that the employees' portion of canteen charges collected by the employer and paid to the canteen service provider does not constitute a supply under GST laws.
- Key Evidence and Findings: The canteen service is part of the HR policy and provided at a subsidized rate.
- Application of Law to Facts: The court found that the arrangement does not amount to a taxable supply by the employer.
- Treatment of Competing Arguments: The court dismissed the appellant's argument that these recoveries should be taxable.
- Conclusions: GST is not leviable on the employees' portion of canteen charges.
Issue 2: Taxability of Free Bus Transportation
- Relevant Legal Framework and Precedents: The CGST Act, 2017 provisions regarding supply and exemptions.
- Court's Interpretation and Reasoning: The court concluded that the provision of free bus transport is not a taxable supply under GST.
- Key Evidence and Findings: The transportation service is provided by a third-party vendor as part of the HR policy.
- Application of Law to Facts: The court relied on clarifications from the Ministry of Finance and circulars stating that such perquisites are not taxable.
- Treatment of Competing Arguments: The appellant's contention of taxability was rejected based on the contractual nature of the service.
- Conclusions: GST is not applicable to the free bus transportation facility provided to employees.
Issue 3: Exemption under Notification No. 12/2017
- Relevant Legal Framework and Precedents: Notification No. 12/2017 - Central Tax (Rate) dated 28 June 2017.
- Court's Interpretation and Reasoning: The court did not need to apply this exemption as the service was not taxable.
- Key Evidence and Findings: The service was provided free of cost and not considered a supply.
- Conclusions: The question of exemption did not arise due to the non-taxability of the service.
Issue 4: Admissibility of Input Tax Credit (ITC)
- Relevant Legal Framework and Precedents: Section 16 and Section 17(5) of the CGST Act, 2017.
- Court's Interpretation and Reasoning: ITC on GST paid for hiring buses with a seating capacity of more than 13 persons is admissible.
- Key Evidence and Findings: The buses used for transportation had a seating capacity exceeding 13 persons.
- Application of Law to Facts: The court found that ITC is not blocked under Section 17(5) for such vehicles.
- Treatment of Competing Arguments: The appellant's argument against ITC admissibility was rejected.
- Conclusions: ITC is admissible for the transportation service.
3. SIGNIFICANT HOLDINGS
- Preserve Verbatim Quotes of Crucial Legal Reasoning: "Perquisites provided by the employer to the employee in terms of contractual agreement entered into between the employer and the employee, will not be subjected to GST when the same are provided in terms of the contract between the employer and employee."
- Core Principles Established: Services provided by employers to employees as per contractual agreements are not taxable under GST; ITC is admissible for transportation services with a seating capacity of more than 13 persons.
- Final Determinations on Each Issue: The appeal by the department was rejected, upholding the GAAR's ruling that neither the canteen recoveries nor the bus transportation facilities are taxable, and ITC is admissible for the transportation service.