GST Vidhi | GST Advance Ruling

M/s Emcure Pharmaceuticals Ltd. Vs Gujarat Appellate Authority for Advance Ruling (GAAAR), GST

 Name of the Party: M/s Emcure Pharmaceuticals Ltd.

Name of the Ruling Authority: Gujarat Appellate Authority for Advance Ruling (GAAAR), GST

Ruling No.: GUI/GAAAR/APPEAL/2024/09

Date of Ruling: 30.12.2024

Summary of Ruling:

• The case pertains to whether GST is applicable on the canteen and bus transportation facilities provided to employees by M/s Emcure Pharmaceuticals Ltd.
• The Gujarat Authority for Advance Ruling (GAAR) earlier ruled that the employee’s share of canteen expenses is subject to GST, whereas the free bus transport facility is not taxable.
• The appellant (Revenue Department) challenged this ruling, arguing that GST should be applicable on both benefits.
• The GAAAR upheld the GAAR ruling, confirming that GST is not applicable on free bus transport for employees but is applicable on the employee’s share of canteen charges.

Facts of Advance Ruling:

• M/s Emcure Pharmaceuticals Ltd. provides subsidized canteen services and free bus transportation for employees.
• The company collects a portion of canteen expenses from employees and pays the rest to the canteen service provider.
• The bus transportation facility is provided free of cost, using non-AC buses with more than 13 seats, through third-party vendors.
• The company sought an advance ruling to determine if GST applies to these services.

Question Raised:

• Whether the canteen facility provided at a subsidized rate to employees is subject to GST?
• Whether the bus transportation facility provided free of cost to employees is subject to GST?

Submission Made by Applicant:

• The canteen facility is mandated under Section 46 of the Factories Act, 1948.
• The employee’s share of canteen charges is collected and passed on to the service provider without any additional markup.
• The bus transport facility is free and not a supply under GST law, as it is part of the employment agreement.
• The company claimed ITC on GST paid for hiring buses, as they have a seating capacity of more than 13 persons, which is not restricted under Section 17(5) of the CGST Act, 2017.

Relevant Sections:

• Section 17(5)(b)(i) of the CGST Act, 2017: Blocks ITC on motor vehicles, except those having a seating capacity of more than 13 persons.
• Schedule I of the CGST Act, 2017: Defines supply of goods and services.
• Circular No. 172/4/2022-GST dated 06.07.2022: Clarifies that perquisites provided under an employment contract are not subject to GST.

Discussion and Findings of Ruling Authority:

• The GAAR held that GST is applicable on the employee’s share of canteen charges but not on free bus transport services.
• The Revenue Department argued that ITC should not be available on hiring buses if GST is not charged on transportation services.
• The GAAAR rejected this argument, confirming that ITC is admissible for hiring buses with more than 13 seats.
• The ruling also relied on Circular No. 172/4/2022-GST, which states that perquisites provided under an employment contract are not taxable.

Final Ruling and Conclusion:

• GST is applicable on the employee’s share of canteen charges, as the company is acting as an intermediary.
• GST is not applicable on free bus transport provided to employees, as it qualifies as a perquisite under employment.
• ITC on hiring buses with more than 13 seats is admissible under Section 17(5)(b)(i) of the CGST Act, 2017.
• The appeal by the Revenue Department was rejected, and the original GAAR ruling was upheld.

Disclaimer: All the Information is based on the notification, circular and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.

Find the Attachment (Press on Click Here )

Click here