TMI Blog2020 (11) TMI 1055X X X X Extracts X X X X X X X X Extracts X X X X ..... urse of employment - Also, the circular mentioning that services of providing membership of a 'club1 or of a 'health or fitness centre' to employees is not subject to GST when provided free of charge to 'all' the employees, indicates that provisioning has to be under contractual agreement of employment. The provisioning of transport facility provided by the Appellant is exclusive of the contractual obligation of the employer in the course of employment. The same shall be liable to GST, on a value that exceeds the total gift value up to ₹ 50000/- given by the Appellant to an employee availing this facility in a financial year. - HAAAR/2020-21/11 - - - Dated:- 27-11-2020 - SHEKHAR VIDYARTHI AND RAJESH SODHI, MEMBER Present for the Applicant : S/Sh. Rajat Mohan, CA; Rajesh Kumar, Sr. Manager; Bharat Sharma, Dy. Manager. Order under Section 101 of Central Goods and Service Tax Act, 2017/Haryana Goods and Service Tax Act, 2017 The present appeal has been filed under Section 100 (1) of Central Goods and Services Tax Act, 2017/Haryana Goods and Services Tax Act,2017 (hereinafter referred to as CGST Act/ HGST Act, respectively) by M/s Beumer I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es for travel to office, the AAR ruled:- The abovementioned Service is taxable under the provision of the HGST/ CGST/ IGST Acts. For valuation of such services, the provisions under Section 15 of the CGST/ HGST Acts are applicable . II. GROUNDS OF APPEAL: Being aggrieved with the impugned order, the appellant filed the appeal with the Grounds of Appeal mentioned in Annexure-II. These are briefly enlisted below:- a. Authority for Advance Ruling (AAR)'s inferences are extraneous, vague and ambiguous; b. AAR hasn't mentioned as to how FBT allowance is a consideration; c. AAR has wrongly correlated FBT allowance and the transportation facility whereas there is no correlation between the FBT Allowance and the Transportation Facility; d. AAR has wrongly interpreted the HR Policy. It doesn't specify that employee not availing transportation facility will get FBT allowance; e. AAR mentions that element of consideration is present but doesn't specify as to how element of consideration is present; f. AAR mentions that Schedule-Ill is not applicable to transportation facility provided by Appellant but doesn't clarify as to how i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of which may lead to heavy penalties and legal repercussions and may impact the operations of the company to a large extent. Hence this act cannot be said to be done in course of furtherance of business as the two activities are not alike. 5. That the transportation facility is provided to the employees is in course of or in relation to its employment has been rejected by AAR without giving clear reason. The Authority stated in its order that the same in not covered under Schedule III whereas the applicant is of the view that:- ...if any benefit, by whatever name called, is a right of the employee in terms of the employment contract/employee policy of the entity, then such benefit shall be treated as emoluments arising out of employment and cannot be treated as a supply and is duly covered by Entry 1 of Schedule III of CGST Act, 2017 The applicant has also submitted a Press release from government dated 10-07-2017 and advance ruling by AAR, Maharashtra in the similar case of Tata Motors Ltd. which rules that such services will not be subjected to GST. 6. that the AAR has given ruling on questions not asked by him (as per para 5.7 of the said ruling), thereby overrid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /08/2020. IV. DISCUSSION AND FINDING We have carefully gone through the Grounds of Appeal. It is observed that the Grounds of Appeal largely question the Ruling granted by the AAR as extraneous, vague and ambiguous. However since all the facts of the case and the application of legal provisions are being carefully examined and discussed afresh, no separate examination of the AAR's order is being undertaken. 1. CORPORATE SOCIAL RESPONSIBILITY It is observed that the Appellant's re-submissions dated 23.03.2021 (supra) are broadly re-worded Grounds of Appeal except the hinted pleading made in these that transportation facility has been provided as a CSR (Corporate Social Responsibility) and non-observance of CSR invites heavy penalties under the Companies Act, 2013. In this regard it is found that the activity of provisioning transport facility to the members from staff doesn't fall under CSR. Relevant Section 135 of the Companies Act 2013 reads as under:- 135. Corporate Social Responsibility.- (1) Every company having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Schedule VII is also reproduced below: SCHEDULE VII (See section 135) Activities which may be included by companies in their Corporate Social Responsibility Policies Activities relating to:- (i) eradicating extreme hunger and poverty; (ii) promotion of education; (iii) promoting gender equality and empowering women; (iv) reducing child mortality and improving maternal health; (v) combating human immunodeficiency virus, acquired immune deficiency syndrome, malaria and other diseases; (vi) ensuring environmental sustainability; (vii) employment enhancing vocational skills; (viii) social business projects; (ix) contribution to the Prime Minister's National Relief Fund or any other fund set up by the Central Government or the State Governments for socio-economic development and relief and funds for the welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women; and (x) such other matters as may be prescribed. From the above it can be inferred that providing transportation facility to the staff members is not covered under the activities prescribed for CSR. The ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re penalty and the GST applicable, as per the terms of the Car leasing company. d. The employees not opting for CLP shall be paid Special Allowance mentioned in their compensation package. e. The write-up on 'Transport Facilities' mentions that all BIL employees can opt and avail this policy except those who are having FBP Allowance under CLP and availing Income Tax benefit, (Viz. as applicable to Travelling Allowance/ Transport Allowance/ Conveyance Allowance - i.e. as a part of the salary) on the same. The above features clearly indicate that the CLP is an option for the employee against a component namely 'Special Allowance' of the compensation package in the contract of employment. Appellant's submission that all BIL employees can opt and avail the Transport Facilities' (under consideration in the present Appeal except those avail FBP Allowance under the CLP, appear to imply that the Transport Facility is an alternative component within the salary structure/ compensation package. However, whereas CLP/FBP Allowance and Special Allowance are substitutive/ mutually exclusive components of the salary and only one is available to the emplo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y shall not be responsibility for the safety of the employees. - Employees are requested to appreciate the travelling distance and start time of a bus / cab from the originating point and accordingly anticipate its timing of arrival. This would vary from place to place and would help to reduce the waiting period for an employee. All employees must ensure a congenial and peaceful environment while travelling in the Bus. As discussed supra, the CLP/FBP Allowance and Special Allowance are (mutually exclusive) components of salary structure/ compensation package. Whether the Car lease policy is a 3rd alternative component of the salary structure/ compensation package vice CLP-FBP/ Special Allowance stands replied by the Appellant who, in the re-submitted grounds of Appeal mentions that CLP has no correlation with Transport Facilities. Also from the terms of the Transport Facilities, it is clear that same is available in addition to Special Package, though not in addition to CLP-FBP. Evidently, the facility is to facilitate employees' smooth commutation to and from the office, where despite the buses' fixed routes and waiting involved, it is more suitable to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to the instant case. The Appellant's plea is that facility has been enabled as contractual transaction between the employer and the employee and same has been provided under their HR (Human Resource) policy therefore it falls under employer's contractual obligation towards the employees under the contract for employment. The Appellant relies upon CBIC's Press Release dated 10.07.2017 on this subject and states that the same amply clarifies such transactions as out of the purview of GST. 5. PRESS RELEASE dated 10.07.2017 During the hearing the Appellant's representatives vehemently pleaded that the transactions within employer-employee relationship have not been envisaged to be taxed under GST. They cited CBIC's press release dated 10.07.2017 and pleaded that the same squarely supports their stand. The Press Release dated 10.07.2017is reproduced below PRESS RELEASE It is being reported that gifts and perquisites supplied by companies to their employees will be taxed in GST. Gifts upto a value of ₹ 50,000/-per year by an employer to his employee are outside the ambit of GST. However, gifts of value more than ₹ 50,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to be under contractual agreement of employment. 6. WHETHER TRANSPORT FACCILITY IS ACOMPONENT OF SALARY The Income under the Head 'Salaries' has been defined under Section 15 of the Income Tax Act 1961, as amended up to the Finance Act 2021 dated 28.03.2021, as under:- Salaries. 15. The following income shall be chargeable to income-tax under the head Salaries ,- (a) any salary due from an employer or a former employer to an assessee in the previous year, whether paid or not; (b) any salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer though not due or before it became due to him; (c) any arrears of salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer, if not charged to income-tax for any earlier previous year. Explanation 1.- For the removal of doubts, it is hereby declared that where any salary paid in advance is included in the total income of any person for any previous year it shall not be included again in the total income of the person when the salary becomes due. Explanation 2.- Any salary, bonus, commission o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.- For the purposes of this sub-clause, concession in the matter of rent shall be deemed to have been provided if,- (a) in a case where an unfurnished accommodation is provided by any employer other than the Central Government or any State Government and,- (i) the accommodation is owned by the employer, the value of the accommodation determined at the specified rate 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; (ii) the accommodation is taken on lease or rent by the employer, the value of the accommodation being the actual amount of lease rental paid or payable by the employer or fifteen per cent of salary, whichever is lower, 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; (b) in a case where a furnished accommodation is provided by the Central Government or any State Government, the licence fee determined by the Central Government or any State Government in respect of the accommodation in accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... includes the pay, allowances, bonus or commission payable monthly or otherwise or any monetary payment, by whatever name called, from one or more employers, as the case may be, but does not include the following, namely:- (a) dearness allowance or dearness pay unless it enters into the computation of superannuation or retirement benefits of the employee concerned; (b) employer's contribution to the provident fund account of the employee; (c) allowances which are exempted from the payment of tax; (d) value of the perquisites specified in this clause; (e) any payment or expenditure specifically excluded under the proviso to this clause. Explanation 4.- For the purposes of this sub-clause, specified rate shall be,- (i) fifteen per cent of salary in cities having population exceeding twenty-five lakhs as per 2001 census; (ii) ten per cent of salary in cities having population exceeding ten lakhs but not exceeding twenty-five lakhs as per 2001 census; and (iii) seven and one-half per cent of salary in any other place; (iii) the value of any benefit or amenity granted or provided free of cost or at concessional rate in any of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roviding know-how or making available rights in the nature of intellectual property rights or value additions, by whatever name called; (c) the value of any specified security or sweat equity shares shall be the fair market value of the specified security or sweat equity shares, as the case may be, on the date on which the option is exercised by the assessee as reduced by the amount actually paid by, or recovered from, the assessee in respect of such security or shares; (d) fair market value means the value determined in accordance with the method as may be prescribed; (e) option means a right but not an obligation granted to an employee to apply for the specified security or sweat equity shares at a predetermined price; (vii) the amount of any contribution to an approved superannuation fund by the employer in respect of the assessee, to the extent it exceeds one lakh rupees; and (viii) the value of any other fringe benefit or amenity as may be prescribed Provided that nothing in this clause shall apply to,- (i) the value of any medical treatment provided to an employee or any member of his family in any hospital maintained by the employer; (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... condition that,- (A) the expenditure on medical treatment and stay abroad shall be excluded from perquisite only to the extent permitted by the Reserve Bank of India; and (B) the expenditure on travel shall be excluded from perquisite only in the case of an employee whose gross total income, as computed before including therein the said expenditure, does not exceed two lakh rupees; (vii) any sum paid by the employer in respect of any expenditure actually incurred by the employee for any of the purpose specified in clause (vi) subject to the conditions specified in or under that clause : Provided further that for the assessment year beginning on the 1st day of April, 2002, nothing contained in this clause shall apply to any employee whose income under the head Salaries (whether due from, or paid or allowed by, one or more employers) exclusive of the value of all perquisites not provided for by way of monetary payment, does not exceed one lakh rupees. Explanation .- For the purposes of clause (2),- (i) hospital includes a dispensary or a clinic 30 or a nursing home; (ii) family , in relation to an individual, shall have the same meaning as i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded as a benefit or amenity granted or provided to him free of cost or at concessional rate for the purposes of this sub-clause. Thus, in Income Tax Law, the use of vehicles for commuting to and from office is not considered as a component of salary. 6. PERQUISITES/ OBLIGATION UNDERCONTRACT OF EMPLOYMENT For an amenity or a perquisite to be an obligation under contract of employment, it should be available as a contractual obligation under the contract of employment. Also it has to be available to all the employees of a level. Where it is optional, an equivalent settled compensation should be available to non-opting employees e.g. the residential accommodation or the HRA (house rent allowance. In other words either the facility or an equivalent compensation as a pre-defined C2C/ cost to company has to be there, and as a part of the compensation package. This is not the case in respect of the Transport facility under consideration which doesn't correspond to any matching compensation for non-opting employees. 7. ADVANCE RULING IN TATA MOTORS LTD. Appellant has relied on a similar case decided by the Maharashtra Authority for Advance Ruling in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n is akin to moveable property received as gift/ without consideration. We find that a gift of the value of ₹ 50,000/- given by the employer to an employee during a financial year is not a taxable supply, in terms of Clause 2 of Schedule-I ibid, to the GST Acts. The clause reads as under:- 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. RULING In view of the above discussions and findings, we find that the transactions executed in the course of contractual obligation of an agreement of employment are beyond the scope of GST as clarified in the Press Release dated 10.07.2017, of CBIC. We hold that provisioning of transport facility provided by the Appellant is exclusive of the contractual obligation of the employer in the course of employment. The same shall be liable to GST, on a value that exceeds the total gift value up to ₹ 50000/- given by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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