The UP bench of the Appellate Authority of Advance Rulings (AAAR) has held that the amount recovered from employees towards car parking charges, which are in turn paid to building authorities, is a ‘supply of service’ by the employer company towards its staff.
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.