No GST on Employee Transportation Recovery Charges by Renault-Nissan | Biz Flow Kit

The Tamil Nadu Authority for Advance Ruling (AAR) affirmed that nominal transportation charges recovered by Renault-Nissan from its employees for arranging office commutes through third-party transport providers do not constitute a “supply” under Section 7 of the Central Goods and Services Tax (CGST) Act, 2017, and hence are not liable to Goods and Services Tax (GST).

M/s Renault Nissan Technology & Business Centre India Private Limited (Renault-Nissan) regulates a support centre for its overseas group entities by furnishing engineering, IT, IT-enabled, back-office and business process outsourcing services from its Special Economic Zone (SEZ) unit located at Mahindra World City, Tamil Nadu.

The company arranged transportation facilities through third-party transport contractors for their employees working at the SEZ unit who resided at various locations outside the SEZ territory. It ensures the commute for employees between designated pickup points and the office premises.

To achieve this, Renault-Nissan secured Private Service Vehicle Permits for their employee transport buses and minibuses, recouping only minimal sums from staff via monthly salary deductions. The company covered the rest of the transportation expenses.

The applicant’s main question to the AAR was whether the small charges collected from staff for transport constitute a “supply” under Section 7 of the CGST Act. If yes, is Renault-Nissan responsible for paying GST on the sum reimbursed by employees, or on the entire payment paid to transport contractors?

It was mentioned that the transportation facility comes under the requirements of employees under the employment contracts, and no separate commercial contract exists between the company and its employees for this objective. Further, the facility no longer exists once the employer-employee relationship is terminated, thus it is not an independent business supply.

The employees were not mandated to use the transport facility and were free to arrange their own means of transport for the workplace commute.

The Bench of C. Thiyagarajan, Member (CGST) and B. Suseel Kumar, Member (SGST), analysed the scope of “supply” u/s 7 of the CGST Act and observed that there existed two separate transactions in the arrangement: transportation services supplied by the transport contractor to the applicant, and the applicant arranging transportation facilities for its employees.

Observing that the company’s business was providing engineering and IT-enabled services and not transportation services, it ruled that employee transportation was only a welfare measure and not an activity conducted in the course or furtherance of business.

As the applicant facilitated transportation via third parties and only collected minor cost-sharing contributions from employees, with no profit for themselves, the core requirements of a supply were not met.

AAR confirmed that transportation benefits were considered an employment perk within contractual agreements and that, according to Schedule III of the CGST Act and CBIC Circular No. 172/04/2022-GST, employer-provided perquisites stemming from employment are exempt from GST.

Consequently, AAR determined that the transportation fee collected by Renault-Nissan from employees for outsourced office transportation was not subject to GST.