Goods and services tax (GST) is triggered whenever there is any such supply. However, as such services were rendered as a ‘pure agent’, their value would be nil.
This appellate order was given in the case of a Noida-based private company Ion Trading, which is a subsidiary of a UK company. The company submitted that the facilitation of parking spaces between its employees and the building authorities does not amount to supply of services as this activity is not in the course of furtherance of its business of software development.
The AAAR did not agree with this stand. But it agreed that the company was not utilising the parking charges collected from employees for its own benefit and the entire sum was passed on to the building authority. Hence, it qualified as a pure agent and the value of services provided by it would be nil. In other words, there would be no GST sum to be collected from employees.
The pandemic has resulted in a large number of employees (who do not work from home) using their own vehicles — be it two- or four-wheelers. This, in turn, results in the employer having to provide for parking space.
In this context, this order given by the UP bench of the AAAR is pertinent. Sunil Gabhawalla, founder of a CA firm, said, “This ruling is in contradiction to an advance ruling in the case of Posco India, where the health insurance expenses for parents recovered from employees was not held to be a supply of service.”
“However, as the AAAR in this case has held that the act of collecting parking fees was performed in its capacity of a pure agent, the ruling may be well-received by the industry, as most of the recoveries from employees are at cost,” he adds.
It should be noted that advance rulings only have a persuasive impact during assessment of similar cases and do not set a judicial precedent.