Employer recoveries for employee transport and canteen services are taxable supplies; exemption and input tax credit were denied.

Employer-provided passenger transport and canteen facilities made available to employees for consideration were treated as taxable supplies under GST, because the employer-to-employee exclusion in Schedule III applies only to services by an employee to the employer and does not cover the reverse arrangement. The transport service was also found not to qualify for exemption as non-air-conditioned contract carriage under Notification No. 12/2017-Central Tax (Rate), since the arrangement was not shown to be a contract carriage service in the statutory sense. Input tax credit on both transport and canteen-related expenses was denied on the basis that the services were for employee consumption and fell within the credit restrictions applied by the Authority.

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Issues: (i) whether passenger transport facility provided by an employer to employees on recovery of a nominal amount is a supply under GST; (ii) whether the exemption for non-air-conditioned contract carriage under Notification No. 12/2017-Central Tax (Rate) applies to such transport; (iii) whether input tax credit on the transport service is available; and (iv) whether canteen facility provided by an employer to employees on recovery of a nominal amount is a supply under GST and whether input tax credit is available.

Issue (i): whether passenger transport facility provided by an employer to employees on recovery of a nominal amount is a supply under GST.

Analysis: The applicant recovered consideration from employees for transportation provided by third-party service providers and then made the facility available to employees. The activity was held to be connected with the applicant's business because employee welfare services such as transport support the principal manufacturing activity and are ancillary to it. The employer's supply to employees was treated as a distinct transaction from the third-party supply to the employer. Schedule III was held to exclude only services by an employee to the employer, not services by the employer to the employee. Since consideration was recovered, the transaction fell within supply under GST.

Conclusion: The transport facility is a taxable supply under GST, and GST is chargeable on the amount recovered from employees.

Issue (ii): whether the exemption for non-air-conditioned contract carriage under Notification No. 12/2017-Central Tax (Rate) applies to such transport.

Analysis: The exemption applies only to transport of passengers by a non-air-conditioned contract carriage other than radio taxi, excluding tourism, conducted tour, charter or hire. The applicant was not the holder of a contract carriage permit, the arrangement was not shown to be a contract carriage service in the statutory sense, and the buses were hired by the applicant from a transport operator on a service arrangement. The service was therefore treated as transport of passengers under the applicable tariff entry and not as exempt contract carriage transport.

Conclusion: The exemption under Notification No. 12/2017-Central Tax (Rate) is not available.

Issue (iii): whether input tax credit on the transport service is available.

Analysis: The transport facility was treated as a service used for employees' personal convenience and consumption. The ruling held that input tax credit on the transport invoices was not available in view of the blocking provision relied upon by the Authority, and the fact that a nominal recovery was made from employees did not alter the credit restriction.

Conclusion: Input tax credit on the transport service is not available.

Issue (iv): whether canteen facility provided by an employer to employees on recovery of a nominal amount is a supply under GST and whether input tax credit is available.

Analysis: The canteen facility was supplied by the applicant to employees for consideration, even though the amount recovered was nominal. The Authority held that the employer-employee exclusion in Schedule III applies only to services by an employee to the employer, not the reverse. The canteen arrangement was therefore treated as a taxable supply by the employer to employees. The ruling also held that input tax credit was not available on the canteen-related expenses in the circumstances considered.

Conclusion: The canteen facility is a supply under GST, GST is chargeable on the recovered amount, and input tax credit is not applicable.

Final Conclusion: The ruling substantially favours the revenue position by holding that the employee transport and canteen recoveries are taxable supplies, while denying exemption and input tax credit on the transport arrangement.

Ratio Decidendi: Services or facilities provided by an employer to employees for consideration are taxable supplies when they are incidental to business and fall outside the limited employer-to-employee exclusion in Schedule III; exemption provisions must be strictly satisfied on their own terms, and input tax credit is not available where the relevant supply is treated as exempt or blocked under the Act.

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