Whether Recovery of Expenses by Employers chargeable to GST – Divergent Advance Rulings

The Hon’ble AAR, Maharashtra in Re: Tata Motors Limited [GST-ARA-23/2019-20/B-46 dated August 25, 2020] held that w.e.f. February 1, 2019 input tax credit (“ITC”) shall be available to employer (Tata Motors) on GST charged by service provider on hiring of bus/motor vehicle having seating capacity of more than 13 persons for transportation of employees to and from workplace.

Further, no GST shall be applicable on the nominal amounts recovered for the same by employer from its employees as no supply of service in terms of Entry 1 of Schedule III, which reads as à “Services by an employee to the employer in the course of or in relation to his employment”.

Furthermore, ITC shall be restricted to the extent of cost borne by the employer.

Whereas Hon’ble AAR, Kerala in Re: Caltech Polymers Pvt. Ltd. [2018 (12) G. S. T. L. 350 (A. A. R. – GST] held that reimbursement of food expenses by employer from the employee is chargeable to GST as it is a deemed supply, it has been considered as incidental and ancillary to the business. Relevant extract:

“It is hereby clarified that recovery of food expenses from the employees for the canteen services provided by company would come under the definition of ‘outward supply’ as defined in Section 2(83) of the Act, 2017, and therefore, taxable as a supply of service under GST”

The Caltech case (supra) has been upheld by Hon’ble AAAR, Kerala [Case No. CT/7726/2018-C3 dated September 25, 2018].

To know divergent perspective discussed at length, kindly watch the video “Whether Recovery of Expenses by Employers chargeable to GST – Divergent AAR || CA Bimal Jain”– 

Hope you will find the video helpful in your professional endeavour.

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