In re Lear Automotive India Private Limited (GST AAR Maharashtra)
The Maharashtra Authority for Advance Ruling (AAR) has ruled that Lear Automotive India Private Limited is liable to pay Goods and Services Tax (GST) on the amounts recovered from its employees towards the provision of subsidized canteen and bus transportation facilities. The AAR also denied the company’s claim for exemption on the transportation services and input tax credit (ITC) on both canteen and transportation services procured from third-party suppliers.
Lear Automotive, a manufacturer of motor vehicle seats, sought clarification on the GST implications of recovering partial costs for canteen and transportation services provided to its employees through third-party vendors, as mandated by the Factories Act, 1948.
The AAR reiterated the stance taken in previous similar cases, stating that the recovery of costs from employees for these services constitutes a taxable supply under Section 7(1) of the CGST Act, 2017. It held that the provision of these facilities, even if subsidized, is a business activity. The transactions involve a supply from the third-party vendor to Lear Automotive and a separate supply from Lear Automotive to its employees, with the salary deductions acting as consideration. The AAR clarified that while the employer’s subsidized portion might be considered a non-taxable perquisite, the recovered amount is subject to GST.
