The definition of “business” under GST law covers any activity or transaction that is incidental or ancillary to the main activity. The amount recovered from the employees for providing canteen and transportation facilities can be considered as supply of service for further business.
The Authority for Advance Ruling (AAR) pronounced the rulings based on the following considerations:
Service of a canteen/ transportation facility is not the furtherance of the applicant’s business as the applicant is not engaged in providing canteen/transportation facility.
The applicant facilitates payment between the contractor and the employees. The applicant does not retain any amount collected from the employees; it merely acts as a pass-through between the employee and the contractor.
The term “perquisite” has not been defined under the GST law. It is any casual emolument or benefit attached to an office or position besides salary or wages. It can be regarded as that portion of the facility that is free to the employees. It appears that only facilities provided to the employees on which the employer makes no recovery are covered under prerequisite.
It appears that the circular cannot be applied to the portion of the amount recovered from the employees for providing the canteen and transportation facility. The reliance of the AAR on the circular is misplaced.
While the circular is intended to settle disputes concerning the treatment of perquisites under GST, the Advance Rulings have extended their applicability. It has resulted in the opening of a Pandora’s box. The issue is far from settled, and there is a need to clarify the taxability scenarios, especially where the employer recovers a subsidised amount from the employee, to put the taxability issue at rest.