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TMI Blog2024 (7) TMI 1239X X X X Extracts X X X X X X X X Extracts X X X X ..... um directly to car leasing company, the appellant admittedly deducts the exact amount from the salary of the employees concerned, i.e., to the extent of cost incurred towards the leasing of cars by the Company. Extending a mere facility does not qualify as a perquisite; that a value in monetary terms is required to be extended to the employees; and that the value of perquisite for consideration is restricted to the value of actual monetary gain extended as in Form 12BA. Therefore, the contention of the appellant that extending the facility of car lease is nothing but a benefit extended to the concerned employee, is not sustainable and does not support their stand. The ownership of car by the company and resultant provisioning of services by the company on their own account amounts to supply of services by them, and this aspect has a direct bearing in determining the taxability in the instant case. It is thus opined that within the facts and circumstances of the case, only the actual value in monetary terms extended to the employee concerned in the course of or in relation to employment, qualifies as a perquisite , and it squarely falls within the ambit of entry No. 1 of Schedule II ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of both the Central Goods and Service Tax Act and the Tamil Nadu Goods and Service Tax Act are in pari materia and have the same provisions in like matter and differ from each other only on few specific provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Service Tax Act, 2017 would also mean a reference to the same provisions under the Tamil Nadu Goods and Service Tax Act, 2017. 2 The subject appeal was filed under Section 100 (1) of the Tamilnadu Goods Services Tax Act 2017/Central Goods Services Tax Act 2017 (hereinafter referred to the Act ) by Faiveley Transport Rail Technologies India Private Limited (hereinafter referred to as Appellant ). The Appellant was registered under the GST Act vide GSTIN 33AAGCS8525B1ZL. The appeal was filed against the Advance Ruling No.125/AAR/2023 dated 20.12.2023 passed by the Tamilnadu State Authority for Advance ruling ( AAR ) on the Application for Advance ruling filed by the Appellant. 3.1 The Appellant is a Private Limited company under the administrative control of STATE and they are engaged in the business of manufacturing, supplying and exporting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Overall Salary cost of the related employees will get reduced to the extent of cost incurred by Company to extend the expense incurred in relation to the car facility provided to employees for office purpose. Facility of car extended to employees is considered as perquisite under Income Tax Act, 1961 and due tax is required to be paid by employees on it under the head Income from Salary. They further stated that in the instant case, the provision of the Car lease premium to employees is not being carried out as a business activity. The appellant quoted the CBIC vide Circular No. 172/04/2022-GST dated 06.07.2022, wherein it has been clarified that any perquisites provided by the employer to its employees in terms of contractual agreement entered into between the employer and the employee are in lieu of the services provided by employee to the employer in relation to his employment. As the Company is willing to provide the facility of car lease to the employees of the Company in terms of the HR policy, the same is a perquisite for the employees, and accordingly, in terms of the above-mentioned Circular, recovery from employees in relation to car lease premium will not be exigible t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of AAR and therefore, the same were submitted only during the course of the hearing; E. Ownership of the car is irrelevant in determining if the same is to be treated as perquisite by the appellant-company. PERSONAL HEARING; 4.1 Shri Ganesh Kumar, Chartered Accountant, and Shri Mohit Sharma, Head of Indirect Tax, the authorized representatives (AR) of the company, appeared for the Personal Hearing on 04.07.2024. The AR reiterated the submissions made by them in the Grounds of Appeal filed with the application. 4.2 The AR stated that the ruling passed by AAR on the issue relating to applicability of GST on facility of car extended to the employees of the Appellant-Company in the course of employment was based on the following four counts, viz., that the facility of car is not extended to all employees of the company in general; that the ownership of car lies with appellant company during the lease period; that the appellant has rendered such services on their own account; and, that the entire amount incurred has been recovered from the employees by the appellant-company. 4.3 The AR contended that not extending the car facility to all employees cannot be a ground to arrive at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng letter/additional submission, in continuation of the personal hearing dated 04.07.2024, with a request to take the following documents on record, viz.,- (i) The covering letter for car lease (ii) Employee Car Lease Policy (iii) Form 16 Part-A (iv) Form 16 Part-B (v) Form 12BA (vi) Personal Hearing record 4.8 On perusal of the documents furnished, it is seen that under the covering letter dated 05.07.2024, apart from reiterating the contentions already put forth by the appellant, they have laid emphasis on the following points, viz., (1) When an eligible employee opts to take a car on lease, instead of car allowance or variable allowance, the appellant will pay the EMI for the car to the car lease service provider and an equivalent salary will not be paid to the employee in cash; (2) In other words, what is getting paid to the employee is essentially their salary only which is being paid in the form of a facility in lieu of their salary in their bank account; and that they are submitting the below mentioned documents in support of their argument, i.e., (a) Employee Car Lease Policy (b) Form 16 along with Form 12 BA of an employee who has opted for the car lease policy, with a rid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to car lease premium will not be exigible to GST. 5.2.1 Under the Grounds of Appeal filed in the instant case, the appellant has contended that the facility of car lease provided to employees under employment contract will qualify as perquisite under Income Tax Act. In this regard, the appellant has argued that as a standard industry practice, the sum total of salary payable including all the allowances and various benefits extended to the employees by the employer is treated as Cost-to-Company ( CTC ). That in order to ascertain whether the car lease policy is classifiable under Entry 1 of Schedule-Ill, it would be imperative to understand the structure of car lease policy and its impact on CTC of the eligible employees. Having floated the car lease scheme in 2023, the policy has been extended to certain band of employees based on their seniority as per organizational structure. The salient features of the car lease policy was summarized as below,- The car lease facility enables the employees of the Appellant-Company to lease a car from car leasing Company appointed by the Appellant-Company; Appellant-Company owns the car for the lease period and the employees can take the car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , but defined under section 17 (2) of the Income Tax Act, that reads as follows:- Perquisite includes: (i) the value of rent-free accommodation provided to the assessee by his employer; (ii) the value of any concession in the matter of rent respecting any accommodation provided to the assessee by his employer; ---------------------- (viii) the value of any other fringe benefit or amenity as may be prescribed . Accordingly, the appellant contended that the value of any benefit provided to an employee is classifiable as perquisite and that nowhere in the definition, it provides that the employer must bear a part of the cost of the benefit provided to the employee, and as long as any benefit is provided to the employee, the same qualifies as perquisite. 5.2.4 The appellant has also placed reliance on the Ruling No. AAR/ST/16/2015 dated 4.12.2015 of the Authority of Advance Ruling, New Delhi in the case of M/s.JP Morgan Services India (P) Ltd., wherein under identical facts, it was held that car lease facility extended to employees, where the entire amount was recovered from the employee, would not be chargeable to Service Tax. The appellant further argued that what is required to be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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. From the above, it could be inferred that perquisites provided by the employer to the employee in terms of a contractual agreement do not constitute a supply and as such are to be kept outside the ambit of GST. Therefore, the moot point here is that in order to get covered under Entry No. 1 of Schedule III of the CGST Act, 2017, two basic conditions are required to be met, viz., (i) the activity qualifies as a perquisite , and (ii) the perquisite provided by the employer should be in terms of a contractual agreement. Accordingly, the terms of such employment contract/agreement, is required to be taken up for discussion in the instant case. However, we notice that the appellant has not furnished copies of any such employment contracts/agreements, or even the excerpts from the same, concerning the issue in question. When the Members enquired specifically about this aspect during the personal hearing held on 04.07.2024, the AR admitted to the lapse on their part and undertook to furnish the same. Accordingly, they furnished ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ywhere under the provisions of GST, the same is defined under Section 17 (2) of the Income Tax Act, 1961, as follows :- perquisite includes,- (i) the value of rent-free accommodation provided to the assesses by his employer; (ii) the value of any concession in the matter of rent respecting any accommodation provided to the assesses by his employer; (iii)----------------- (viii) the value of any other fringe bene fit or amenity as may be prescribed 5.2.10 It could be further inferred from the above, that any facility extended free of charge, or, any facility extended on a concessional basis shall qualify as a perquisite. We further observe that a perquisite refers to a Value in monetary terms in respect of the facility extended by the employers to their employees. Most importantly, the analogy of clause (ii) as above that reads as the value of any concession in the matter of rent respecting any accommodation provided to the assesses by his employer , confirms the fact that only the value/portion to the extent of benefit extended, concession offered or the expenses, if any, borne by the employer is to be treated as a perquisite and not the remaining portion/value that has been charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant in turn extends the same to their employees, on actual basis. We are of the opinion that this amounts to provision of services by the appellant on their own account to their employees. Once the applicant themselves admit that they do no bear any cost, or absorb any portion of the cost incurred, and when the entire lease premium is recovered from the salary of the employees concerned, we are of the opinion that the amount recovered do not qualify as a perquisite by any means whatsoever, and therefore the transaction in the instant case, does not get covered within the ambit of entry 1 of Schedule III of the CGST Act, 2017, even if it is in the course of employment. 5.2.13 We notice that the appellant has placed reliance on the Ruling No. AAR/ST/16/2015 dated 4.12.2015 of the Authority of Advance Ruling, New Delhi in the case of M/s.JP Morgan Services India (P) Ltd., wherein under identical facts, it was held that car lease facility extended to employees, where the entire amount was recovered from the employee, would not be chargeable to Service Tax. In this regard, it becomes imperative to point out that advance rulings are applicant-specific and it applies only to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utives (e.g. free cars, club memberships, insurance, etc.) It was therefore contended by the appellant that perquisite is nothing but a fringe benefit provided to an employee and that the term attaching to an office or position is indicative that the same may be provided to certain employees holding certain position in the company. Accordingly, since other similar benefits such as leased accommodation or interest free loan are also provided to specific employees, but they are considered as perquisites, irrespective of the fact that the same may not be extended to other employees. 5.3.2 We are in complete agreement with the contention of the appellant that the eligibility criteria for availing any facility is immaterial to ascertain whether the same is perquisite or not. However, on perusal of the impugned ruling dated 20.12.2023 of AAR, we find that in para 8.5.2, the AAR had just discussed the difference in nature of the various facilities, viz., the canteen facility, mass transportation facility, etc., which were also extended by the appellant in the instant case. We find that the AAR attempts to determine the taxability or otherwise of the case in question only in para 8.5.3, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ates that the cost of the car lease policy is not a separate cost to the company, but a component of the overall CTC of the employee, and as the facility provided is in their course of employment, it falls clearly within the scope of Entry 1 of Schedule III of the CGST Act. 5.4.2 In this case, the appellant themselves admit the fact that car lease policy is not a separate cost to the company. Understandably, when the actual expenses incurred are recovered in full from the employees concerned, it does not affect the employer and it affects only the net salary receivable by the employee. It is pertinent to observe here the case of other facilities like the canteen facility or the mass transportation facility, which when provided free of cost or on concessional basis, adds as a cost to company (CTC), and in such cases actual benefit accrues to the employees on monetary basis. Therefore, we are of the considered opinion that only such benefits qualify as perquisites and when they are provided in terms of the employment agreement, they clearly fall within the scope of Entry 1 of Schedule III of the CGST Act. On the other hand, the facility of Car lease as in the instant case, even when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that the car is bought in the name of the Appellant-company, and that after the end of the lease, the employee is required to transfer the car to his name. However, merely because the car is bought on lease in the name of the Company, it cannot be said the facility is being provided on its own account. The car lease facility provided is nothing but a scheme for the benefit of the employees provided out of employer-employee relationship, as evident from the Transit Car Policy submitted. The appellant submits that they act as a facilitator between the car lease company and the employees, and that the same qualifies as a perquisite, irrespective of the ownership of the car. Accordingly, the appellant submits that to the extent the impugned order holds car lease facility as a non-perquisite and consequently taxable, is unsustainable and bad in law. 5.6.2 The appellant s submission that they act as a facilitator between the car lease company and the employees, is misplaced inasmuch as the ownership of the cars remains admittedly with the company when they procure these services upfront for the company. And when these facilities are extended to the employees, it amounts to rendition of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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