Gujarat AAR: Employer Can Claim GST Tax Credit on Services of Non-AC Buses to Employees

The Gujarat bench of the Authority for Advance Ruling (AAR) has ruled that an employer can claim Input Tax Credit (ITC) on the Goods and Services Tax (GST) paid for Non-AC Bus Transport Services provided to their employees by Transport Service Providers (TSPs) employing buses with a capacity of more than 13 seats.

The judgment was made in response to a request for clarification on the tax implications of several employee benefits granted by a well-known manufacturer of automobile parts, M/s. Tata Autocomp Systems Ltd.

For the purpose of offering the employees transportation services, the applicant has contracted TSPs. TSP refers to any individual or organization that offers transportation for goods, freight, passenger transport, or other related services.

The candidate represented by Suyash Maheshwari, Vikash Agarwal, and Manish Kumar Mishra argued that the transportation service offered to employees was a perk of their job and was only in existence for their convenience.

The service was only available to employees, and the TSP operates the buses in accordance with the applicant’s previously approved route schedule. When using the facility, employees had to show their ID cards issued by the applicant company, and the service ended once an employee left the organization.

The AAR observed that the transportation provision is beyond the purview of supply and does not qualify as consideration under Section 7 of the Central Goods and Services Tax (CGST) Act, 2017, as a result of the absence of a noticeable supply in the provision.

To further support its decision that the transportation service provided to employees does not qualify as a supply subject to GST, the Authority also cited a number of rulings and circulars, including Tata Motors Ltd, Dr William Schwabe (1) P Ltd, North Shore Technologies P Ltd, Ion Trading India P Ltd, and Circular No. 177/9/22-TRU.

Finally, the Authority, which was comprised of Milind Kavatkar, a member of the State Goods and Services Tax (SGST), and Amit Kumar Mishra, a member of the Central Goods and Services Tax (CGST), made it clear that the employer, M/s. Tata AutoComp Systems Ltd. is qualified to claim ITC on the GST it paid for non-AC bus transportation services provided to employees by TSPs with buses that can hold more than 13 passengers.