Is partial recovery for staff transport a GST supply?

No. The AAR held the company is not supplying transport to staff; it merely recovers part of third-party cab costs already taxed.

Does employee transport link to the company’s core business?

No. The facility isn’t integral to software development and isn’t in the course or furtherance of that business.

Who is the supplier of transport in this arrangement?

Third-party cab vendors are the suppliers. The company is only the recipient and later recovers a part from employees.

Is valuation needed between related parties here?

No. Since there is no supply by employer to employees, valuation questions do not arise.

When would GST apply to such recoveries?

Only if the employer actually supplies or agrees to tolerate an act for consideration under the contract. Those facts aren’t present here.

In re Integrated Decisions and Systems India Pvt Ltd

Quick Summary

The AAR held that recovering part of employee transport cost does not amount to a supply by the employer under GST. The company is a recipient of cab services from third-party vendors, and GST is already paid on those vendor invoices. As the transport facility is not integral to software development, no GST is payable by the employer on such recovery.

Code: GST-ARA-116/2019-20/B-113
Forum: Maharashtra AAR

Core Point: No employer supply; no valuation between related parties
Outcome: Queries on value/time of supply not applicable

Issues

Does partial recovery from employees for company-arranged transport count as a supply by the employer?
If yes, how should the value be determined, considering employer–employee are related persons under GST?

Rules

Facilities to employees that are not integrally connected to the business’s core function are not a supply.
Where there is no supply by employer to employee, questions of valuation or time of supply do not arise.

Facts (Timeline)

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Business: The Applicant provides software development and support to its foreign holding company.

Facility: Company arranges employee transport via third-party cabs and pays vendors in full.

Recovery: Company recovers a part of the cab cost from employees who use the facility.

Advance Ruling: Asked if this recovery is a supply and, if yes, how to value it between related persons.

Timeline for Integrated Decisions & Systems India employee transport GST ruling

Arguments

Applicant

Transport is provided by vendors, not by the employer.
Recovery is only cost sharing; GST already paid on vendor invoices.
Facility is not integral to software development.

Authority’s View

No employer output service of transport or rental is provided.
Partial recovery does not convert it into a supply by the employer.
Valuation/time of supply questions are redundant.

Judgment

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No supply by employer. The AAR held that arranging cabs is not incidental or ancillary to the core software business and is not a supply in the course or furtherance of that business. The vendor’s bills suffer GST; employer’s recovery from employees does not attract GST.

Judgment graphic for Integrated Decisions & Systems India employee transport case

Ratio (Legal Principle)

Employee facilities not integral to the business’s main function do not constitute a supply by the employer. Cost recovery ≠ supply when the actual service is from a third party and already taxed.

Why It Matters

Clarifies employee recoveries for common facilities under GST.
Helps frame HR policies and payroll deductions without GST exposure.
Reduces disputes on valuation between employer–employee.

Key Takeaways

No employer supply where third-party vendors provide transport.
Not integral to software development → not in course of business.
GST already paid on vendor invoices; employer recovery is cost share.
Valuation/time questions don’t apply in absence of supply.

Mnemonic + 3-Step Hook

Mnemonic: “CAB ≠ SUPPLY”

CAB by vendor,
≠ employer service,
SUPPLY not made by employer.

3-Step Hook

Identify the actual supplier (vendor).
Check if the facility is integral to business.
If not integral and vendor supplies → no employer supply.

IRAC Outline

Issue	Rule	Application	Conclusion
Is employer’s partial recovery for staff transport a GST supply?	Facilities not integrally connected to core business are not a supply.	Transport provided by vendors; employer only shares cost; software business runs without this facility.	No supply by employer; valuation/time of supply not applicable.

Glossary

Supply (GST): Transfer or provision of goods/services for consideration in the course of business.
Cost Recovery: Collecting part of what was paid to a third party without markup.
Integral to Business: So closely linked that the business cannot reasonably function without it.

FAQs

No. It remains cost sharing. Without an employer service, GST is not attracted merely due to recovery mode.

Facts change. If the employer supplies transport for consideration, GST analysis may differ based on exemptions and valuation.

ITC depends on blocking provisions and contract terms. This case focused on taxability of recovery, not ITC entitlement.

Not on these facts. There’s no agreement to tolerate a breach for a fee; the employer simply shares vendor costs.

Publication & SEO Block

CASE_TITLE: In re Integrated Decisions and Systems India Pvt Ltd (GST-ARA-116/2019-20/B-113)
PRIMARY_KEYWORDS: employee transport under GST; cost recovery; employer supply
SECONDARY_KEYWORDS: AAR Maharashtra; software company; vendor cabs; valuation