Subsidized employee transport not considered a service by company under GST law

The subsidized shared transport facility provided to employees in terms of the employment contract through third-party vendors was held not to be construed as a "Supply of service" by the company to its employees. Consequently, the determination of the value of the subsidized shared transport facility and the questions related to the liability to pay GST and applicable rates were deemed redundant. The ruling is valid within the jurisdiction of the Authority for Advance Ruling Uttar Pradesh, subject to provisions under the CGST Act, 2017.

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Issues Involved:
1. Whether the subsidized shared transport facility provided to employees in terms of employment contract through third-party vendors would be construed as "Supply of service" by the company to its employees.
2. If the answer to the above question is affirmative, how the value of the subsidized shared transport facility provided to employees under the employment contract will be determined by the applicant.
3. If the answer to question 1 is affirmative, under which service classification the activity of arranging transport facility for employees would fall.
4. If the answer to question 1 is affirmative, who would be liable to pay the GST and what rate of GST would be applicable on the value of supply determined under question 2 above.

Issue-wise Detailed Analysis:

1. Whether the subsidized shared transport facility provided to employees in terms of employment contract through third-party vendors would be construed as "Supply of service" by the company to its employees:

The Authority examined whether the subsidized transport facility provided by the applicant to its employees constitutes a "Supply of service." According to Section 7(1) of the CGST Act 2017, "Supply" includes all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease, or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business. The term "Service" is defined under Section 2(102) of the CGST Act 2017 as anything other than goods, money, and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency, or denomination to another form, currency, or denomination for which a separate consideration is charged.

The Authority observed that the applicant is not in the business of providing transport services but in software development and staff augmentation services. The transport facility is provided under the obligation of law and is not integrally connected to the business functioning. The applicant is transferring the entire amount collected from employees to the third-party vendor without retaining any portion. Therefore, providing transport facility to employees is not in furtherance of business and does not constitute a "Supply of service."

2. How the value of the subsidized shared transport facility provided to employees under the employment contract will be determined by the applicant:

Since the answer to the first question is negative, this question becomes redundant and does not merit discussion.

3. Under which service classification the activity of arranging transport facility for employees would fall:

As the answer to the first question is negative, this question also becomes redundant and does not merit discussion.

4. Who would be liable to pay the GST and what rate of GST would be applicable on the value of supply determined under question 2 above:

Given the negative response to the first question, this question becomes redundant and does not merit discussion.

Ruling:

1. The subsidized shared transport facility provided to employees in terms of the employment contract through third-party vendors is not construed as "Supply of service" by the company to its employees.
2. As the first question is answered in the negative, the determination of the value of the subsidized shared transport facility provided to employees under the employment contract is redundant.
3. The classification of the activity of arranging transport facility for employees is redundant due to the negative answer to the first question.
4. The liability to pay GST and the applicable rate on the value of supply determined under question 2 is redundant as the first question is answered in the negative.

Validity:

This ruling is valid only within the jurisdiction of the Authority for Advance Ruling Uttar Pradesh and subject to the provisions under Section 103(2) of the CGST Act, 2017 until and unless declared void under Section 104(1) of the Act.

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