In re Tvl.Faiveley Transport Rail Technologies India Private Limited (GST AAAR Tamil Nadu)
In the case of Tvl.Faiveley Transport Rail Technologies India Private Limited vs. GST AAAR Tamil Nadu, the core issue is the GST applicability on the car lease facility provided to employees. The appellant contends that this facility is a perquisite under the Income Tax Act, 1961, and therefore should not attract GST. This article provides a detailed analysis of the arguments presented, the statutory provisions involved, and the final conclusions drawn by the GST AAAR.
Detailed Analysis
1. Background and Arguments
The appellant, Tvl.Faiveley Transport Rail Technologies India Pvt. Ltd., argued that the car lease facility offered to employees should not be subject to GST. They contended that:
- The lease premium is paid directly by the company to the leasing company.
- The overall salary cost for employees is reduced to reflect this benefit.
- Under Income Tax Act, 1961, such benefits are considered perquisites.
- According to CBIC Circular No. 172/04/2022, perquisites provided in terms of a contractual agreement are not subject to GST.
The company argued that providing a car lease facility aligns with their HR policy and is treated as a perquisite, which, as per CBIC guidelines, should be exempt from GST.
2. Key Points from the Appeal
- Cost-to-Company (CTC) Structure: The appellant emphasized that the CTC remains unchanged whether or not an employee opts for the car lease. The lease amount is adjusted from the employee’s CTC, reflecting it as an allowance rather than a business expense.
- Perquisite Definition: The appellant argued that perquisites, as defined under Section 17(2) of the Income Tax Act, include benefits such as car leases provided by the employer. They claimed that as long as the benefit is provided under the employment contract, it should not be subject to GST.
- Circular Reference: The CBIC Circular No. 172/04/2022 clarifies that perquisites provided under contractual agreements are not considered a supply and thus are not taxable under GST.
3. Review of Car Lease Policy
The car lease policy of Tvl.Faiveley included several features:
- The company leases the car, and employees pay the lease premiums from their salaries.
- The company absorbs costs such as road tax and insurance.
- After the lease term, employees have the option to transfer ownership or return the car.
The policy effectively adjusts employees’ CTC by incorporating the car lease into their compensation package.
4. Taxability Analysis
According to Entry No. 1 of Schedule III of the CGST Act, services provided by an employee to an employer in the course of employment are not considered a supply. However, the reverse—services by the employer to the employee—can be subject to GST unless explicitly exempted.
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