AAR: GST Not Imposed on Transportation & Canteen Services Via 3rd Parties

The Authority for Advance Rulings (AAR), Gujarat bench ruled that GST does not get applied to the provision of transportation and canteen utilities via third parties to the employees under the contract.

The petitioner, M/s SRF Limited is a multi-business chemicals conglomerate involved in manufacturing industrial and speciality intermediates. The petitioner’s business portfolio covers fluorochemicals, speciality,’ chemicals, packaging films, technical textiles, and coated and laminated fabrics.

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The petitioner furnishes that, he gives facilities of the canteen to the organisation’s employees, he is in a contract with the third-party service vendor M/s Shashi Catering Services Private Limited.

The petitioner, the service of the bus transportation would be furnished to the company employees, not through the applicant to its employees since the same would be a portion of the HR policy only arranges the bus transportation utility at a subsidized normal rate for the ease of its employees; however, the transporters ask for the monthly invoices including a GST levied on the petitioner and a part of the same charges would be recovered through the petitioner via its employees under the internal HR policy.

State Member Milind Kavatkar and Central Member Amit Kumar Misra ruled that as the same would be neither the petitioner’s business nor his in the impugned case is furnishing Bus Transportation services, this recovery, under the petitioner’s understanding of the law, does not entitle as ‘supply’ in order to be covered beneath the ambit of GST law.

Bench sees that under the contract with the transporter the gross value of bills was asked by the transporter. The petitioner company under its HR policy has recovered half of the amount via employees while the left amount would be carried via the petitioner.

Finishing the order, the bench ruled that the petitioner would furnish the transport and the canteen utility to its permanent employees on payroll under the contractual agreement between employer-employee relationships. CBIC vide Circular No. 172/04/2022-GST dated 06-07 -22 provides the specified clarification on the problem of whether GST would be levied on the advantage furnished via the employer to its employees for the contractual agreement inserted between the employer and the employee.

“The Provision of Services of transport and canteen facility to its employees is as per the contractual agreement between the employee and the employer in relation to the employment. As cited in the above-referred provisions of scheduled III and the clarification issued vide Circular No. 172/04/12022 GST dated 06-07-22, the provision of the services of transportation and canteen facility cannot be considered as supply of goods or services and hence cannot be subjected to GST,” the bench articulated.