North Shore Technologies Pvt. Ltd applies for AAR Uttar Pradesh (order no. 59 of 2020 June 29) It is held that the software company providing the employees the transportation facility for traveling from office to their houses does not necessarily mean that it becomes ancillary or incidental.

Providing transport facilities does not help or is nowhere connected to the development of software thus it is not considered as ‘supply of service’.

M/s North Shore Technologies Private Limited provides a transport facility to the employees through a third-party vendor who charges cost along with GST in the name of the company. Since the company has not claimed ITC on these transport charges, it deducts some percentage of costs from the employees’ salary and pays the balance cost itself.

ISSUE :

Is subsidized shared transport facility provided to employees in terms of the employment contract is considered ‘supply of services to the employees by the company?

Before learning the judgment given to this case, let’s see what happened with cases similar to this;

1.  TATA MOTORS LIMITED

The company also provides transportation facilities to the employees through another third-party service provider. 

AAR Maharastra concluded that the supply of services the company availed was ancillary to the main course of business and the company used it in the furtherance of their business

1.  M/S CALTECH POLYMERS PVT LTD.

AAR Kerala decided that the food facility that the company was providing to the employees is an activity that provides food facility is an activity that provides necessary support to the primary activities of the organization.

What are ‘business’ and ‘supply’?

• Sec 2(17) of the CGST Act 2017 defines ‘business’ as : 
  • Business includes any trade, commerce, manufacture,
  • profession, vocation, adventure, wager, or any other similar activity whether or not it is for a pecuniary benefit.

• Sec 1(7) of the CGST Act 2017 defines ‘supply’ as :

Supply includes sale, transfer, exchange, barter, license, rental, lease, and disposal, carried out for consideration in the courseor furtherance of business.

AAR Uttar Pradesh rules the case of North Shore Technologies as follows : 

North Shore Technologies Pvt Ltd is a software development company. Since it is not in the transport services business, and it provided the transport facility to the convenience of the employees only and also the company has used amount deducted from the employees’ salaries only to the payment of the third-party vendor along with paying the rest of the amount itself, it is concluded that it cannot be considered as supply of service in the course or furtherance of business and the transport facility is not ancillary to the activity of software development as it is nowhere connected to the business in such a way that without this activity the business will not operate.