GST applicability on recoveries from employees.

[suresh sathyamurthy]

Dear Sir

This is with regard to applicability of GST on recovery from employees towards food and transportation (pickup & drop).

As per the recent advanced ruling of Maharashtra dated 4.10.2019, (AUTHORITY FOR ADVANCE RULING, MAHARASHTRA IN RE: M/S. JOTUN INDIA PVT. LTD. GST-ARA-19/2019-20/B-108 Dated: - 04 October 2019) = 2019 (10) TMI 482 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA were it is given ruling that applicant is not in the business of providing insurance coverage i.e recovery of health insurance premium from employees is not amounts to supply of service under section 7GST Act 2017.

As per above advance ruling, recovery from employee is constitute supply or not???

Can we apply same logic even for recovery from employee towards transportation and not remit GST

Can we apply same logic even for recovery from employee towards canteen expenses and not remit GST

[KASTURI SETHI]

Same logic cannot be applied in respect of both examples cited by you.On the second issue AAAR KERALA has already decided the issue in favour of the department.

2018 (18) G.S.T.L. 373 (App. A.A.R. - GST) = 2018 (10) TMI 1313 - APPELLATE AUTHORITY FOR ADVANCE RULING, KERALA IN RE : CALTECH POLYMERS PVT. LTD.

[Ganeshan Kalyani]

Amount collected toward supply of food to the employee/worker amounts to consideration and GST becomes applicable.

[Ganeshan Kalyani]

The rulings cited by you has different facts and the same cannot be referred to the issue in the query.

[Himansu Sekhar]

Yes, bith issues are different.

[suresh sathyamurthy]

Maharastra AAR  = 2019 (10) TMI 482 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA has stated that “The applicant is not in the business of providing insurance coverage i.e recovery of health insurance premium from employees is not amounts to supply of service”

In Most of the case, The nature of business is different, only to have commitment from the employee a small portion will be recovered on canteen or transport facilities from employees, no profit motive.

Going by the facts that, nature of business is different, why we cannot rely on Maharastra AAR. Can you please brief,

Further as mentioned above how is it different from both the AAR can you please brief so it will be beneficial.

[KASTURI SETHI]

If any issue has been decided by the AAAR which is pro-revenue, the department would follow that. If any person applies the decision of AAR, Maharashtra to canteen and transportation for availing benefit from the decision thereof, it would not be litigation free.

[Alkesh Jani]

Sir,

In this regards, I wish to bring relevant portion of flier issued.

"The Authority for Advance Ruling (AAR) and the Appellate Authority for Advance Ruling (AAAR) constituted under the provisions of a State Goods and Services Tax Act or Union Territory Goods and Services Tax Act shall be deemed to be the Authority for advance ruling (AAR) and Appellate Authority for Advance Ruling (AAAR) in respect of that State or Union territory under the CGST Act, 2017 also. Thus it can be seen that both the Authority for Advance Ruling (AAR) & the Appellate Authority for Advance Ruling (AAAR) is constituted under the respective State / Union Territory Act and not the Central Act."

An advance ruling pronounced by AAR or AAAR shall be binding only on the applicant who has sought the advance ruling and on the concerned officer or the jurisdictional officer in respect of the applicant. This clearly means that an advance ruling is not applicable to similarly placed other taxable persons in the State. It is only limited to the person who has applied for an advance ruling.

Of course based on ruling one can also file for advance ruling but one should not apply the ratio for same kind of activity, as it may not be litigation free.

Thanks

[KASTURI SETHI]

Sh.Alkesh Jani Ji,

I agree with you. When AAAR decides any issue, it matters a lot. It paves the way for others. Rather, such order of AAAR lays the foundation.

[Ganeshan Kalyani]

Yes, the advance ruling is applicable to the applicant alone.

AI Summary

GST on employee recoveries: AARs are applicant specific, so canteen and transport recoveries may remain taxable.
GST on employee recoveries turns on whether recoveries constitute a supply of service. A Maharashtra AAR found health insurance premium recoveries from employees not to be supply for that applicant, but other rulings and the AAAR have treated canteen and transport recoveries as consideration subject to GST. Advance rulings bind only the applicant and the jurisdictional officer; relying on another taxpayer's AAR for similar activities risks adverse department action and litigation.