Employee Transportation Facility a Welfare Measure, Not a Business Activity, No GST Applicable: AAR:

Employee Transportation Facility a Welfare Measure, Not Business Activity, No GST Applicable: AAR The Tamil Nadu Authority for Advance Ruling decided that Renault Nissan does not have to pay GST on the small amounts it collects from employees for transportation facilities. The reason? These recoveries are not seen as a “supply” under Section 7 of the CGST Act. Basically, the rides count as employee perks—a welfare measure—not as part of any business activity. [related id="418325."] Fact Renault Nissan Technology & Business Centre India Pvt. Ltd. works out of an SEZ in Tamil Nadu, offering engineering, IT, and BPO services. To help its employees get to work, the company arranges transport through outside vendors and then recovers a token amount from employees via their paychecks. Renault-Nissan pays the whole fare to the transport company and claims input tax credit for the GST charged by the vendor. The transport facility isn’t mandatory; it’s something employees can choose if they want, and the company treats it as part of their perks. When questions came up about whether GST applies to the amount collected from employees, the company took the issue to the Authority for Advance Ruling. Issue Is the amount Renault Nissan collects from employees for these rides considered a “supply” under the CGST Act? And if it is, Does GST apply to the employee recovery or to the full fare paid to the vendor? Court Observation The authority looked at the setup and said there are actually two separate transactions. One, between the transport vendor and Renault-Nissan, this is straightforwardly taxable. Two, between Renault, Nissan, and its employees that is the real question. For something to be treated as a supply under the law, it has to be connected to the company’s main business, and there must be some consideration (i.e., payment) involved. Since Renault-Nissan's main business is IT, engineering, and BPO—not running buses—the transport is just a welfare measure, not a core business activity. It is optional for employees, and the company is not running its own transport service; it is just passing on the cost from a third party, with no markup or profit. The Authority also pointed out that this sort of employee perk falls outside the scope of GST, as stated in Schedule III of the CGST Act and supported by official CBIC circulars. Judgment The nominal amounts taken from employees for rides do no count as “supply” because they are not part of the company’s main business and there is no real intention to make a profit. GST does not apply. Since that question is answered, there is no need to discuss how to value such recoveries. Key Highlight If an employer offers transport as a benefit or welfare measure, and even partially recovers the cost, it is not a taxable supply under GST. It is just a part of the perks and not business as usual.