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TMI Blog2020 (11) TMI 1055X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacturing/trading of Intralogistics System. They have hired Motor Vehicles on contract basis from a Transport Agency. They are using said vehicles to provide transportation facility to employees in accordance with their human resource policy at either a nominal cost where the vehicles are air conditioned, or free of cost in other cases. Questions for Advance Ruling: Applicant had requested for Advance Ruling on:- a. Whether GST is payable on transportation facility provided by the employer (Applicant) to its employees for travel between predefined location to its the office, free of cost i.e. without any recovery being made from them. If yes what would be taxable value of the said transaction? b. Whether GST is payable on the recovery of nominal amount on account of air conditioning facility for transportation facility provided by the employer (Applicant) to its employees for travel between predefined location. If yes then what would be the taxable value in the said transaction? Ruling by Advance Ruling Authority The Authority for Advance Ruling (AAR) observed that the Business of the Applicant is manufacturing/ trading of intralogistics system which is duly covered in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Tata Motors Ltd. by AAR Maharashtra relied upon by the Appellant in their additional submissions have not been taken into consideration by the AAR; j. AAR has provided that the activity of providing transportation facility is not exempt whereas the Appellant had not requested for any advance ruling as to exemption; k. The Ruling granted by AAR that determination of valuation shall be according to Section 15, is ambiguous; The Appellant made further submitted following as their Grounds of Appeal on 23-03-2021:- 1. That there is no correlation between FBP (Flexible Benefit Plan) allowance and transportation facility and the Hon Tile AAR has erred in linking the two in its order. Such linking is not supported by any documentary evidence submitted by the applicant. The FBP is a separate car leasing policy provided to employees and doesn't include any component related to conveyance. 2. That the AAR has wrongly drawn conclusions regarding the employees getting additional benefit in lieu of not availing transportation facility, which is in fact an allowance under CLP (Car leasing Policy). The applicant has also submitted a copy of CLP in support of the same. 3. That a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quently GST is not leviable on it. III. RECORD OF PERSONAL HEARING; S/Sh. Rajat Mohan, CA; Rajesh Kumar, Sr. Manager; Bharat Sharma, Dy. Manager attended the PH on 25.08.2021 on behalf of the appellant M/s Beumer India Pvt. Ltd. They vehemently pleaded that the transactions within employer/employee relationship have not been envisaged to be taxed under GST. That, this was amply clear from the by the PRESS RELEASE dated 10.07.2017 of the government. Additionally they reiterated in details the grounds already mentioned in the memorandum of the Appeal and emphasized that the transport facility being a part of their HR policy, squarely is a transaction within employer-employee relationship and thus out of the purview of supplies taxable under GST. On the specific exclusion of gifts upto 50000/- per employee from the scope of supply vide proviso to clause 2 of Schedule-I as a direct indication of taxability of transactions between employer and the employee even if made without consideration, they repeated that the Press Release ibid was a more surer indication of no taxability. They specifically requested to take on record the following two items as their submission in support of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of expenditure to be incurred on the activities referred to in clause (a); and (c) monitor the Corporate Social Responsibility Policy of the company from time to time. (4) The Board of every company referred to in sub-section (1) shall,- (a) after taking into account the recommendations made by the Corporate Social Responsibility Committee, approve the Corporate Social Responsibility Policy for the company and disclose contents of such Policy in its report and also place it on the company's website, if any, in such manner as may be prescribed; and (b) ensure that the activities as are included in Corporate Social Responsibility Policy of the company are undertaken by the company. (5) The Board of every company referred to in sub-section (1), shall ensure that the company spends, in every financial year, at least two per cent, of the average net profits of the company made during the three immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy: Provided that the company shall give preference to the local area and areas around it where it operates, for spending the amount earmarked for Corporate Social Responsibility activ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xi Benefit Plan) Allowance and the Transportation facility. That, the FBP Allowance is an allowance given under CLP (Car Lease Policy) to those who opt to avail the CLP." The details of Car Lease Policy (CLP) and the Flexi Benefit Plan (FBP) submitted by the Appellant provide that in terms of the CLP an eligible employee can select a Car falling in the price bracket and the monthly allowance entitled to him under the policy read with the Flexi Benefit Plan (FBP). The Car selected shall be leased-in by the Appellant M/s Beumer India Ltd. (BIL) and be made available to the employee against the deduction of his entitled FBP Allowance. The employee shall be entitled to purchase the car after the lease period which shall not exceed 60 months. Since the Employee is entitled to purchase the car at the end of the lease period, he may go for a shorter lease period and a higher monthly lease rental but the amount of lease rental must fall within his monthly entitlement under FBP. Only the employees with WL-2 (Work Level - 2) and above can avail; WL-2 is entitled to Cars up to the value of Rs. 8 Lakhs subject to individual's entitled ceiling under FBP. The Work Level - 1 (WL-1) employee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ept those who are having FBP Allowance in their salary structure under the Car Lease Policy and availing Income Tax benefits for the same. General Rules,- - The facility is for the employees based at Gurgaon Office who wish to use a bus-service in the morning / evening for Pick and drop facility. - Employees shall connect P&C or Admin Dept, to opt for the Bus Facility and they have to inform P&C and Admin department if wants to discontinue with the facility. - Company shall provide the bus facility (Pick & Drop) to the employees asper pre-defined location in and around their place of residence. - Buses shall ply for the general shift only, 8:30 to 5:00 pm. For late siting employees, another bus will be available at 7 pm to drop to the nearest Metro Station. - There will be no bus service on weekends and holidays - Employees are required to declare the exact point from where they will board the bus (this information should be synchronous with the present residential address as per the employee data base). - All bus routes will be planned and laid out by the Admin Team so as to have the buses ply on the man / arterial routs in order to ensure coverage of the maximum a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SUPPLY EVEN IF MADE WITHOUT CONSIDERATION 1. ..... 2. Supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business: Provided that gifts not exceeding fifty thousand rupees in value in a financial year by an employer to an employee shall not be treated as supply of goods or services or both." Employee and the Employer have been proclaimed as related persons for the purpose of CGST/SGST Act, vide Explanation (a) (iii)under Section 15. Thus, even a consideration is not necessary for taxing the service and the activity shall be treated as a Supply in terms of Schedule-I ibid. The Appellant infers that since the transport facility has been provided to the employees under a contract the same would be out of the scope of GST. It is submitted that an option exercised against an offer to avail a facility effectually enters the two parties into a contract as per the Indian Contract Act 1872. If the Appellant's inference is accepted, all kinds of services provided to employees by an employer viz. provided against any kind of contract, shall be out of GST. This, obviously, is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ership of a club, health and fitness centre section 17 (5) (b) (ii). It follows, therefore, that if such services are provided free of charge to all the employees by the employer then the same will not be subjected to GST, provided appropriate GST was paid when procured by the employer. The same would hold true for free housing to the employees, when the same is provided in terms of the contract between the employer and employee and is part and parcel of the cost-to-company (C2C). It is observed that the Press Release very lucidly clarifies that transactions in the course of contractual obligation between employer and the employee are beyond the scope of GST. The same is very well reliable where employer-employee relation is in place and any service by the employer needs to be examined for leviability under GST. The same aptly provides that since service by an employee to the employer is outside the purview of GST, it follows that so will be the supply by the employer to the employee made in terms of the contract of employment. However as observed supra, the transportation facility is exclusive of the contractual obligation of the employer in the course of employment. Also, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17. For the purposes of sections 15 and 16 and of this section,- (1) "salary" includes,- (i) wages; (ii) any annuity or pension; (iii) any gratuity; (iv) any fees, commissions, perquisites or profits in lieu of or in addition to any salary or wages; (v) any advance of salary; (va) any payment received by an employee in respect of any period of leave not availed of by him; (vi) the annual accretion to the balance at the credit of an employee participating in a recognised provident fund, to the extent to which it is chargeable to tax under rule 6 of Part A of the Fourth Schedule; (vii) the aggregate of all sums that are comprised in the transferred balance as referred to in sub-rule (2) of rule 11 of Part A of the Fourth Schedule of an employee participating in a recognised provident fund, to the extent to which it is chargeable to tax under sub-rule (4) thereof; and (viii) the contribution made by the Central Government or any other employer in the previous year, to the account of an employee under a pension scheme referred to in section 80CCD; (2) "perquisite" includes,- (i) the value of rent-free accommodation provided to the assessee by his employer; ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in respect of the period during which the said accommodation was occupied by the assessee during the previous year, exceeds the rent recoverable from, or payable by, the assessee; (d) in a case where the accommodation is provided by the employer in a hotel (except where the assessee is provided such accommodation for a period not exceeding in aggregate fifteen days on his transfer from one place to another), the value of the accommodation determined at the rate of twenty-four per cent of salary paid or payable for the previous year or the actual charges paid or payable to such hotel, whichever is lower, for the period during which such accommodation is provided, exceeds the rent recoverable from, or payable by, the assessee. Explanation 2. - For the purposes of this sub-clause, value of furniture and fixture shall be ten per cent per annum of the cost of furniture (including television sets, radio sets, refrigerators, other household appliances, air-conditioning plant or equipment or other similar appliances or gadgets) or if such furniture is hired from a third party, the actual hire charges payable for the same as reduced by any charges paid or payable for the same by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le by the employer, whether directly or through a fund, other than a recognised provident fund or an approved superannuation fund 12or a Deposit-linked Insurance Fund established under section 3G of the Coal Mines Provident Fund and Miscellaneous Provisions Act, 1948 (46 of 1948), or, as the case may be, section 6C of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952), to effect an assurance on the life of the assessee or to effect a contract for an annuity; *** (vi) the value of any specified security or sweat equity shares allotted or transferred, directly or indirectly, by the employer, or former employer, free of cost or at concessional rate to the assessee. Explanation.- For the purposes of this sub-clause,- (a) "specified security" means the securities as defined in clause (h) of section 215 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and, where employees' stock option has been granted under any plan or scheme therefor, includes the securities offered under such plan or scheme; (b) "sweat equity shares" means equity shares issued by a company to its employees or directors at a discount or for consideration ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 36; (iv) any sum paid by the employer in respect of any premium paid by the employee to effect or to keep in force an insurance on his health or the health of any member of his family under any scheme approved by the Central Government or the Insurance Regulatory and Development Authority established under subsection (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999), for the purposes of section 80D; (v) any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or treatment of any member of his family other than the treatment referred to in clauses (i) and (ii); so, however, that such sum does not exceed fifteen thousand rupees in the previous year; (vi) any expenditure incurred by the employer on- (1) medical treatment of the employee, or any member of the family of such employee, outside India; (2) travel and stay abroad of the employee or any member of the family of such employee for medical treatment; (3) travel and stay abroad of one attendant who accompanies the patient in connection with such treatment, subject to the condition that,- (A) the expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his employment with that person." From the above provisions of Income Tax law, it is clear that for charging Income Tax, Salary includes several 'Perquisites' and 'Profits in lieu of Salary'. These terms have also been defined ibid vide sub-Sections 17(2) and 17(3) of the Income Tax Act. None of these mentions 'Transportation facility '. However, clause (Ui) under sub-Section 17(2) includes the value of benefits and amenities under Perquisites to make these taxable under the Head Salaries. It reads, "(iii) the value of any benefit or amenity granted or provided free of cost or at concessional rate in any of the following cases- ..".But noteworthy is the specific exclusion of the 'use of vehicle provided by company' from the ambit of Benefits or Amenities. The Explanation to the clause reads, "Explanation.- For the removal of doubts, it is hereby declared that the use of any vehicle provided by a company or an employer for journey by the assessee from his residence to his office or other place of work, or from such office or place to his residence, shall not be regarded as a benefit or amenity granted or provided to him free of cost or at concessiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Transport Facility for employees with no equivalent provisioning for non-opting employees, is exclusive of the contractual obligation of the employer under the contract for employment. It's been provided to suit his business requirements and is in furtherance to his business. The same would be taxable under relevant provisions of the CGST and HGST Acts. GIFT Sub-Section (2) of Section 56 of Income Tax Act 1961 taxes sums received under the Head 'Income from Other Sources'. Clause (vii)(a) of sub-section (2) of Section 56 includes the sum of money where it exceeds Rs. 50000/- received by an Individual or an HUF without 'consideration' as the income from other sources, for taxing under the act. The clause (vii)(c) of the sub-Section (2) of Section 56 includes fair market value of a movable property where it exceeds Rs. 50000/ - received by an Individual or an HUF without 'consideration' as the income from other sources, for taxing under the act. Thus it is clear that a sum of money received without consideration is akin to moveable property received as gift/ without consideration. We find that a gift of the value of Rs. 50,000/- given by the employer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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