Employee Transport Recovery Not Taxable as It Is Not in Course of Business: AAR Tamilnadu

In re Renault Nissan Technology & Business Centre India Private Limited (GST AAR Tamilnadu)

The Tamil Nadu Authority for Advance Ruling (AAR) examined whether nominal amounts recovered by an employer from its employees for transportation services constitute a “supply” under Section 7 of the CGST Act, 2017, and if so, the applicable valuation for GST.

The applicant is engaged in providing engineering, IT, IT-enabled services, and business process outsourcing services to group entities located outside India. To facilitate employee commuting, the applicant arranged transportation services through third-party transport service providers. Employees could opt to use this facility, and a nominal amount was recovered from them via payroll deductions, while the remaining cost was borne by the employer. The applicant also availed input tax credit on the GST charged by the transport service provider.

The applicant contended that such recoveries were part of the employer-employee relationship and constituted a perquisite under the employment contract. It argued that the arrangement was not a “supply” as there was no independent contractual relationship, no commercial objective, and no element of consideration in the nature of quid pro quo. The recovery was described as cost-sharing rather than consideration for a service.

The AAR analysed the arrangement by identifying two distinct transactions: (i) supply of transportation services by the transport service provider to the applicant, and (ii) arrangement of transportation by the applicant for its employees. The ruling focused on the second transaction.