TaxTMI 
TaxTMI 
2020 (11) TMI 1055
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.... Ltd., Gurugram is engaged in the business of manufacturing/trading of Intralogistics System. They have hired Motor Vehicles on contract basis from a Transport Agency. They are using said vehicles to provide transportation facility to employees in accordance with their human resource policy at either a nominal cost where the vehicles are air conditioned, or free of cost in other cases. Questions for Advance Ruling: Applicant had requested for Advance Ruling on:- a. Whether GST is payable on transportation facility provided by the employer (Applicant) to its employees for travel between predefined location to its the office, free of cost i.e. without any recovery being made from them. If yes what would be taxable value of the said transaction? b. Whether GST is payable on the recovery of nominal amount on account of air conditioning facility for transportation facility provided by the employer (Applicant) to its employees for travel between predefined location. If yes then what would be the taxable value in the said transaction? Ruling by Advance Ruling Authority The Authority for Advance Ruling (AAR) observed that the Business of the Applicant is manuf....
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.... has held the Advance Rulings by other states as not applicable but has not provided reasons therefor; i. The Advance Ruling pronounced in the case of Tata Motors Ltd. by AAR Maharashtra relied upon by the Appellant in their additional submissions have not been taken into consideration by the AAR; j. AAR has provided that the activity of providing transportation facility is not exempt whereas the Appellant had not requested for any advance ruling as to exemption; k. The Ruling granted by AAR that determination of valuation shall be according to Section 15, is ambiguous; The Appellant made further submitted following as their Grounds of Appeal on 23-03-2021:- 1. That there is no correlation between FBP (Flexible Benefit Plan) allowance and transportation facility and the Hon Tile AAR has erred in linking the two in its order. Such linking is not supported by any documentary evidence submitted by the applicant. The FBP is a separate car leasing policy provided to employees and doesn't include any component related to conveyance. 2. That the AAR has wrongly drawn conclusions regarding the employees getting additional benefit in lieu of not avail....
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....order which deserves to be set aside. As per his understanding such service, being covered under Entry 1 of Schedule III of CGST Act, doesn't fall under the definition of supply and consequently GST is not leviable on it. III. RECORD OF PERSONAL HEARING; S/Sh. Rajat Mohan, CA; Rajesh Kumar, Sr. Manager; Bharat Sharma, Dy. Manager attended the PH on 25.08.2021 on behalf of the appellant M/s Beumer India Pvt. Ltd. They vehemently pleaded that the transactions within employer/employee relationship have not been envisaged to be taxed under GST. That, this was amply clear from the by the PRESS RELEASE dated 10.07.2017 of the government. Additionally they reiterated in details the grounds already mentioned in the memorandum of the Appeal and emphasized that the transport facility being a part of their HR policy, squarely is a transaction within employer-employee relationship and thus out of the purview of supplies taxable under GST. On the specific exclusion of gifts upto 50000/- per employee from the scope of supply vide proviso to clause 2 of Schedule-I as a direct indication of taxability of transactions between employer and the employee even if made without considerat....
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.... The Corporate Social Responsibility Committee shall,- (a) formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the company as specified in Schedule VII; (b) recommend the amount of expenditure to be incurred on the activities referred to in clause (a); and (c) monitor the Corporate Social Responsibility Policy of the company from time to time. (4) The Board of every company referred to in sub-section (1) shall,- (a) after taking into account the recommendations made by the Corporate Social Responsibility Committee, approve the Corporate Social Responsibility Policy for the company and disclose contents of such Policy in its report and also place it on the company's website, if any, in such manner as may be prescribed; and (b) ensure that the activities as are included in Corporate Social Responsibility Policy of the company are undertaken by the company. (5) The Board of every company referred to in sub-section (1), shall ensure that the company spends, in every financial year, at least two per cent, of the average net profits of the ....
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....d vehicles to provide transportation facility to employees in accordance with their human resource policy (HR Policy) at either a nominal cost where the vehicles are air conditioned, or free of cost in other cases. FBP (FLEXI BENEFIT PLAN) and CLP (CAR LEASING POLICY) The Appellant has provided the details of their Car Lease Policy under the Flexi Benefit Plan but have stated, "There is no correlation between FBP (Flexi Benefit Plan) Allowance and the Transportation facility. That, the FBP Allowance is an allowance given under CLP (Car Lease Policy) to those who opt to avail the CLP." The details of Car Lease Policy (CLP) and the Flexi Benefit Plan (FBP) submitted by the Appellant provide that in terms of the CLP an eligible employee can select a Car falling in the price bracket and the monthly allowance entitled to him under the policy read with the Flexi Benefit Plan (FBP). The Car selected shall be leased-in by the Appellant M/s Beumer India Ltd. (BIL) and be made available to the employee against the deduction of his entitled FBP Allowance. The employee shall be entitled to purchase the car after the lease period which shall not exceed 60 months. Since the Employee is ....
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...., "This facility is for the employees based at Gurgaon Office who wish to use a bus service in the morning/ evening for Pick and Drop facility". For ready reference, the terms of Transport Facility are being reproduced here: "TRANSPORT FACILITIES Objectives The objective of this policy is to work towards providing a safe, efficient and cost-effective transport facility to BIL employees. Scope All BIL corporate employees can avail and opt for this facility, except those who are having FBP Allowance in their salary structure under the Car Lease Policy and availing Income Tax benefits for the same. General Rules,- - The facility is for the employees based at Gurgaon Office who wish to use a bus-service in the morning / evening for Pick and drop facility. - Employees shall connect P&C or Admin Dept, to opt for the Bus Facility and they have to inform P&C and Admin department if wants to discontinue with the facility. - Company shall provide the bus facility (Pick & Drop) to the employees asper pre-defined location in and around their place of residence. - Buses shall ply for the general shift only, 8....
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....rms of the transportation facility, it is clear that same is conditional and is available against an option only. Thus it is observed that the facility is exclusive of the contractual obligation of the employer in the course of employment. Despite the same being provided as the company's HR policy but is obviously the company's policy motivated by business requirements. The same is evidently in furtherance of employer-Appellant's business. 3. APPLICATION OF LAW Attention is drawn to Schedule-1 to HGST/ CCGS Act 2017: - "SCHEDULE I See section 7 ACTIVITIES TO BE TREATED AS SUPPLY EVEN IF MADE WITHOUT CONSIDERATION 1. ..... 2. Supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business: Provided that gifts not exceeding fifty thousand rupees in value in a financial year by an employer to an employee shall not be treated as supply of goods or services or both." Employee and the Employer have been proclaimed as related persons for the purpose of CGST/SGST Act, vide Explanation (a) (iii)under Section 15. Thus, even a consider....
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....d is made occasionally. It cannot be demanded as a matter of right by the employee and the employee cannot move a court of law for obtaining a gift. Another issue is the taxation of perquisites. It is pertinent to point out here that the services by an employee to the employer in the course of or in relation to his employment is outside the scope of GST (neither supply of goods or supply of services). It follows therefrom that supply 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. Further, the input tax credit(ITC) scheme under GST does not allow ITC of membership of a club, health and fitness centre section 17 (5) (b) (ii). It follows, therefore, that if such services are provided free of charge to all the employees by the employer then the same will not be subjected to GST, provided appropriate GST was paid when procured by the employer. The same would hold true for free housing to the employees, when the same is provided in terms of the contract between the employer and employee and is part and parcel of the cost-to-company (C2C). It is observed that the Press Release ....
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....e computed after making the following deductions, namely:- (i-a) a deduction of forty thousand rupees or the amount of the salary, whichever is less; (ii) a deduction in respect of any allowance in the nature of an entertainment allowance specifically granted by an employer to the assessee who is in receipt of a salary from the Government, a sum equal to one-fifth of his salary (exclusive of any allowance, benefit or other perquisite) or five thousand rupees, whichever is less; (iii) a deduction of any sum paid by the assessee on account of a tax on employment within the meaning of clause (2) of article 276 of the Constitution, leviable by or under any law. "Salary", "perquisite" and "profits in lieu of salary" defined. 17. For the purposes of sections 15 and 16 and of this section,- (1) "salary" includes,- (i) wages; (ii) any annuity or pension; (iii) any gratuity; (iv) any fees, commissions, perquisites or profits in lieu of or in addition to any salary or wages; (v) any advance of salary; (va) any payment received by an employee in respect of any period of leave not availe....
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....e assessee during the previous year, exceeds the aggregate of the rent recoverable from, or payable by, the assessee and any charges paid or payable for the furniture and fixtures by the assessee; (c) in a case where a furnished accommodation is provided by an employer other than the Central Government or any State Government, and- (i) the accommodation is owned by the employer, the value of the accommodation determined under sub-clause (i) of clause (a) as increased by the value of the furniture and fixtures in respect of the period during which the said accommodation was occupied by the assessee during the previous year, exceeds the rent recoverable from, or payable by, the assessee; (ii) the accommodation is taken on lease or rent by the employer, the value of the accommodation determined under sub-clause (ii) of clause (a) as increased by the value of the furniture and fixtures in respect of the period during which the said accommodation was occupied by the assessee during the previous year, exceeds the rent recoverable from, or payable by, the assessee; (d) in a case where the accommodation is provided by the employer in a hotel (except wher....
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....ee being a person who has a substantial interest in the company; (c) by any employer (including a company) to an employee to whom the provisions of paragraphs (a) and (b) of this sub clause do not apply and whose income under the head "Salaries" (whether due from, or paid or allowed by, one or more employers), exclusive of the value of all benefits or amenities not provided for by way of monetary payment, exceeds fifty thousand rupees: * * * Explanation.- For the removal of doubts, it is hereby declared that the use of any vehicle provided by a company or an employer for journey by the assessee from his residence to his office or other place of work, or from such office or place to his residence, shall not be regarded as a benefit or amenity granted or provided to him free of cost or at concessional rate for the purposes of this subclause; (iiia) *** (iv) any sum paid by the employer in respect of any obligation which, but for such payment, would have been payable by the assessee; (v) any sum payable by the employer, whether directly or through a fund, other than a recognised provident fund or an approved superannuation fund 12o....
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....ure actually incurred by the employee on his medical treatment or treatment of any member of his family,- (a) in any hospital maintained by the Government or any local authority or any other hospital approved20 by the Government for the purposes of medical treatment of its employees; (b) in respect of the prescribed diseases or ailments, in any hospital approved by the Chief Commissioner having regard to the prescribed guidelines : Provided that, in a case falling in sub-clause (b), the employee shall attach with his return of income a certificate from the hospital specifying the disease or ailment for which medical treatment was required and the receipt for the amount paid to the hospital; (iii) any portion of the premium paid by an employer in relation to an employee, to effect or to keep in force an insurance on the health of such employee under any scheme approved by the Central Government or the Insurance Regulatory and Development Authority established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999), for the purposes of clause (ib) of sub-section (1) of section 36; (iv....
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....g as in clause (5) of section 10; and(77) "gross total income" shall have the same meaning as in clause (5) of section 80B; (3) "profits in lieu of salary" includes,- (i) the amount of any compensation due to or received by an assessee from his employer or former employer at or in connection with the termination of his employment or the modification of the terms and conditions relating thereto; (ii) any payment (other than any payment referred to in clause (10), clause (10A) , clause (10B), clause (11), clause (12), clause (13) or clause (13A) of section 10), due to or received by an assessee from an employer or a former employer or from a provident or other fund * * *, to the extent to which it does not consist of contributions by the assessee or interest on such contributions or any sum received under a Keyman insurance policy including the sum allocated by way of bonus on such policy. Explanation.- For the purposes of this sub-clause, the expression "Keyman insurance policy" shall have the meaning assigned to it in clause (10D) of section 10; (iii) any amount due to or received, whether in lump sum or otherwise, by any assessee from a....
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....uling in the case of M/s Tata Motors Limited NO.GST-ARA-23/2019-20/B-46 Mumbai, dated 25/08/2020. However, it is observed that the order of the Maharashtra AAR is on different facts and it will be incorrect to apply the same to the instant case There were two questions raised for Advance Ruling in the Tata Motors case viz.- i. Whether ITC shall be admissible in respect of motor vehicles of authorized seating capacity of above 13 persons (hired and) used, for provisioning of transport facility to the employees free of cost, or in respect of AC vehicles, at nominal cost; and ii. Whether such a facility shall be liable to GST. The AAR Maharashtra ruled that ITC shall be admissible but also ruled that no GST shall be applicable on the transport facility. The logic the AAR gave was that M/s. Tata Motors Ltd. is a recipient of the service from the provider of vehicles but not a provider of service to the employees. 8. FINDINGS Thus the legal provisions, we find, are very clear. As discussed supra, the clause 2. of Schedule-I (of CGST/SGST Acts) brings a supply between related persons, even if made without consideration, under the purview of the GST. Th....