AAR rules no GST on provision of transportation through third parties

AAR rules no GST on provision of transportation through third parties

The facilities do not come under the ambit of the supply of goods or services

The Gujarat bench of the Authority for Advance Rulings (AAR) has held that Goods and Services Tax (GST) is not leviable on the provision of transportation and canteen facilities to employees through third parties as per the contract.

The applicant, SRF Limited, a multi-business chemicals conglomerate, is engaged in the manufacturing of industrial and specialty intermediates. The applicant's business portfolio covers fluorochemicals, specialty chemicals, packaging films, technical textiles, and coated and laminated fabrics.

The applicant submitted that it provides canteen facilities to the employees of the company after entering a contract with third-party service vendor Shashi Catering Services Private Limited.

It contended that bus transportation service was being provided to the employees of the company and not by the applicant to its employees. As a part of its human resources policy, it was merely arranging transportation facilities at a subsidized nominal rate for the comfort and ease of the employees.

It further stated that the bus transporters raised monthly invoices along with GST and a small portion of such charges were recovered by the applicant from its employees as per the internal policy.

The bench comprising Milind Kavatkar (state member) and Amit Kumar Misra (central member) held that it was not the applicant's business to provide transportation services. Hence, the recovery did not qualify as 'supply' to be covered under the GST laws.

AAR observed that as per the contract with the transporter, the gross value of the bills was raised by the transporter on the applicant. The applicant company, as per its policy, recovered the partial amount from the employees and the remaining amount was borne by the applicant.

The bench observed, "The provision of transport services and canteen facility to its employees is as per the contractual agreement between the employee and the employer in relation to the employment. It cannot be considered as supply of goods or services, and hence, cannot be subjected to GST."