No GST payable on recoveries from employees towards transport facility

AAR Maharashtra vide its order GST-ARA-23/2019-20/B-46 dated AUGUST  25, 2020 in the case of Tata Motors Limited rules that no GST is payable by the applicant on the nominal amounts recovered from its employees for availing transportation service for commuting to office in view of the fact that this transaction is not a supply as being covered under Schedule III of the CGST Act. ITC also available on such GST paid for motor vehicles taken on hire by the employer for such transportation.

Brief facts of the case:

1. The brief facts of the case are that the company hired the motor vehicles (non-air conditioned) having approved seating capacity of more than 13 persons (including driver) from vendors who charged GST on such hire charges.
2. The company is using these vehicles EXCLUSIVELY for transportation of its employees from their residence to office and back.
3. The company recovers nominal amount from employees towards this.
4. The company avails ITC of the GST charged by the agency from whom the company has taken these motor vehicles on hire.

The questions before authority for advance ruling:

1. Whether input tax credit (ITC) available to Applicant on GST charged by service provider on hiring of bus/motor vehicle having seating capacity of more than thirteen person for transportation of employees to & from workplace?

2. Whether GST is applicable on nominal amount recovered by Applicants from employees for usage of employee bus transportation facility in non-air conditioned bus?

3. If ITC is available as per question no. (1) Above, whether it will be restricted to the extent of CGST borne by the Applicant (employer)?

Submissions by the applicant:

1. Section 17(5)( b )( i ) of the CGST Act. 2017 as amended,  blocks ITC on leasing, renting or hiring of motor vehicles having approved seating capacity of not more than 13 persons. Hence ITC is allowed on leasing, renting or hiring of motor vehicles having seating capacity of more than 13 person.
2. By Press release dated 10-7-2017, it was clarified that supply by employer to the employees in terms of contractual agreement of employment entered into between employer and employee (which are treated as a part of salary/CGST to company), will not be subject to GST and expenditure on employee bus transportation service borne by Applicant arc part and parcel of CTC to the company .
3. It is admitted by the applicant that in similar transactions carried out in pre-GST regime, it was held by various courts that credit is not admissible to manufacturer on part of CGST borne by worker and thus ITC will be restricted to the extent of CGST borne by the employer .

Findings and ruling

1. We have no doubt that in the subject case, the supply of services received by the applicant is used in the course or furtherance of their business and therefore  prima facie , they are eligible to take credit of GST charged by their suppliers.
2. In the subject case, since the applicant has specifically submitted and as agreed by the jurisdictional officer, that they are using motor vehicles having approved seating capacity of more than thirteen persons (including the driver), the applicant shall be eligible for Input Tax Credit in this case as after amendment to section 17(5) with effect from 1.2.2019 the ITC is not blocked if the motor vehicle is having approved capacity of 13 persons or more and is used for transportation of passengers.
3. In the subject case, the transaction between the applicant & their employees, due to "Employer-Employee" relation as slated by the applicant in their submissions, is not a supply under GST Act. Since the applicant is not supplying any services to its employees, in view of Schedule III mentioned above, we arc of the opinion GST is not applicable on the nominal amounts recovered by Applicants from their employees in the subject case.
4. The applicant, citing the decision of the Hon'ble High court of Bombay in the case of  CCE , Nagpur v.  Ultratech Cements Ltd.  as reported in 2010 (260) FLT 369 (Bom) has submitted that ITC is not admissible to Applicant on part of CGST borne by employee and thus ITC will be restricted to the extern of CGST borne by the Applicant. The jurisdictional officer has also endorsed the view of the applicant and we have no reason to deviate from the view expressed by both, the applicant as well as the jurisdictional officer.

AAR Maharashtra vide its order GST-ARA-23/2019-20/B-46 dated AUGUST  25, 2020 in the case of Tata Motors Limited rules that no GST is payable by the applicant on the nominal amounts recovered from its employees for availing transportation service for commuting to office in view of the fact that this transaction is not a supply as being covered under Schedule III of the CGST Act. ITC also available on such GST paid for motor vehicles taken on hire by the employer for such transportation.

Brief facts of the case:

1. The brief facts of the case are that the company hired the motor vehicles (non-air conditioned) having approved seating capacity of more than 13 persons (including driver) from vendors who charged GST on such hire charges.
2. The company is using these vehicles EXCLUSIVELY for transportation of its employees from their residence to office and back.
3. The company recovers nominal amount from employees towards this.
4. The company avails ITC of the GST charged by the agency from whom the company has taken these motor vehicles on hire.

The questions before authority for advance ruling:

1. Whether input tax credit (ITC) available to Applicant on GST charged by service provider on hiring of bus/motor vehicle having seating capacity of more than thirteen person for transportation of employees to & from workplace?

2. Whether GST is applicable on nominal amount recovered by Applicants from employees for usage of employee bus transportation facility in non-air conditioned bus?

3. If ITC is available as per question no. (1) Above, whether it will be restricted to the extent of CGST borne by the Applicant (employer)?

Submissions by the applicant:

1. Section 17(5)( b )( i ) of the CGST Act. 2017 as amended,  blocks ITC on leasing, renting or hiring of motor vehicles having approved seating capacity of not more than 13 persons. Hence ITC is allowed on leasing, renting or hiring of motor vehicles having seating capacity of more than 13 person.
2. By Press release dated 10-7-2017, it was clarified that supply by employer to the employees in terms of contractual agreement of employment entered into between employer and employee (which are treated as a part of salary/CGST to company), will not be subject to GST and expenditure on employee bus transportation service borne by Applicant arc part and parcel of CTC to the company .
3. It is admitted by the applicant that in similar transactions carried out in pre-GST regime, it was held by various courts that credit is not admissible to manufacturer on part of CGST borne by worker and thus ITC will be restricted to the extent of CGST borne by the employer .

Findings and ruling

1. We have no doubt that in the subject case, the supply of services received by the applicant is used in the course or furtherance of their business and therefore  prima facie , they are eligible to take credit of GST charged by their suppliers.
2. In the subject case, since the applicant has specifically submitted and as agreed by the jurisdictional officer, that they are using motor vehicles having approved seating capacity of more than thirteen persons (including the driver), the applicant shall be eligible for Input Tax Credit in this case as after amendment to section 17(5) with effect from 1.2.2019 the ITC is not blocked if the motor vehicle is having approved capacity of 13 persons or more and is used for transportation of passengers.
3. In the subject case, the transaction between the applicant & their employees, due to "Employer-Employee" relation as slated by the applicant in their submissions, is not a supply under GST Act. Since the applicant is not supplying any services to its employees, in view of Schedule III mentioned above, we arc of the opinion GST is not applicable on the nominal amounts recovered by Applicants from their employees in the subject case.
4. The applicant, citing the decision of the Hon'ble High court of Bombay in the case of  CCE , Nagpur v.  Ultratech Cements Ltd.  as reported in 2010 (260) FLT 369 (Bom) has submitted that ITC is not admissible to Applicant on part of CGST borne by employee and thus ITC will be restricted to the extern of CGST borne by the Applicant. The jurisdictional officer has also endorsed the view of the applicant and we have no reason to deviate from the view expressed by both, the applicant as well as the jurisdictional officer.