Rajasthan AAR: Levy 18% GST on Manpower Supply Services on Adani SPV Towards AAI

In the case of the Airports Authority of India (AAI) regarding the transfer of the operations, management, and development of the Jaipur International Airport to a special purpose vehicle of Adani Enterprises as a “going concern,” the Authority for Advance Rulings, Rajasthan (AAR), has held that transaction is exempt from GST due to a specific notification.

But AAR ruled that the reimbursement of staff costs via the Adani SPV to AAI is the manpower supply and thus tends to levy an 18% GST.

AAI sent several bills to the Adani SPV to reimburse personnel salaries and expenses. In this case, the Rajasthan GST-AAR panel observed that until the new firm takes them on, certain personnel are not included in the transfer of the business as a whole.

Additionally, they have the choice to accept or reject the job offer.

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“This ruling identifies a scenario in the overall scheme which will not enjoy exemption available to transfer of a business as a going concern. In case the employees are retained during the joint operation period and the proposed buyer reimburses the salaries of such employees, then this transaction takes the colour of manpower supply services. This is owing to lack of certainty on the date of transfer of a business as to which employees shall finally be absorbed by the buyer,” the tax expert elaborated.

The same law is opposite to the stand that the Gujarat and UP AAR benches took, which counted the transfer as a going concern of the Ahmedabad and Lucknow airport, respectively to Adani Group SPV.

The Rajasthan GST AAR sees that there would be the transfer of the business functions, managing and developing the Jaipur airport for the duration of 50 years. There would be the temporary business transfer, the notification would not mention that merely permanent transfers would be counted.