GST On Transportation Services Provided To Employees
1. It is held by AAR Maharashtra in re of Tata Motors Limited [ 2020] that Input Tax Credit (ITC) is available on GST charged by the service provider on the hiring of bus/motor vehicle having a seating capacity of more than thirteen person for transportation of employees to & from the workplace.
2. Brief Facts The applicant has engaged service providers to provide a transportation facility to its employees. in non-air-conditioned buses having a seating capacity of more than 13 person.
The applicant is issuing a pass to ensure the use of the transportation facility only by authorized persons/employees, and the nominal amount is recovered from the employees on monthly basis. The employee transportation facility is open to all the employees desirous of availing the facility. Once, employee ceases to be in employment with the applicant, he/she is not authorized to use the transportation facility. In other words, the Employer-Employee relationship is a must to avail of this facility.
3. Ruling :
3.1 Employer is Eligible for Input Tax Credit: It is held that Input Tax Credit (ITC) is available to the employer on GST charged by the service provider on the hiring of a bus/motor vehicle having a seating capacity of more than thirteen person for the transportation of employees to & from the workplace.
Section 16 of the CGST Act. 2017. Contains provisions with respect to eligibility and conditions for taking ITC. As per Section 16(1). every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in Section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business.
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.
Input Tax Credit has been allowed on leasing, renting or hiring of motor vehicles, for transportation of persons, having approved seating capacity of more than thirteen persons (including the driver). – Sec 17(5) as amended vide CGST (Amendment) Act. 2018 with effect from 1-2-2019
However, if the motor vehicle hired by them does not have an approved seating capacity of more than thirteen persons (including the driver), then in that case the applicant will not be eligible for Input Tax Credit.
3.2 ITC is available to the extent of GST borne by the employer: The employer recovers a nominal amount from employees towards transportation charges on monthly basis. The difference between the amount paid to the service provider and the amount recovered from employees is GST to the company. In similar transactions carried out in the pre-GST regime, it was held by various courts that credit is not admissible to the manufacturer on part of CGST borne by the worker and thus ITC will be restricted to the extent of CGST borne by the employer.
3.3. GST is not applicable on the nominal amount recovered by Applicants from employees for the usage of employee bus transportation facility in a non-air conditioned bus: It is held by the AAR Maharashtra that the applicant is not providing transportation facility to its employees, in fact, the applicant is a receiver of such services provided by the bus transporters and the employees are users of the said receipted service.
Hence GST is not applicable to nominal amounts recovered by the applicants from their employees for the usage of employee bus transportation facility in a non-air conditioned bus.
Further, It is also held by AAR Maharashtra that since the applicant is not supplying any services to its employees,, GST is not applicable on the nominal amounts recovered by the applicants from their employees in the subject case.
The applicant has submitted that they issue pass only to their employees so that the transportation facility can be used by such employees, for which the nominal amount is recovered on monthly basis. They have also submitted that once, employee ceases to be in employment with Applicant, he/she is not authorized to use the transportation facility. In other words, the employer-employee relationship is a must to avail of this facility.
The transaction between the applicant & their employees, due to the “Employer-Employee” relation as stated by the applicant in their submissions, is not a supply under the GST Act.
Additionally, It was clarified vide press release dated 10.07.2017 that supply by the 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 the company), will not be subject to GST and expenditure on employee bus transportation service borne by Applicant are part and parcel of CGST to company
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