The Gujarat AAR, in the matter of Suzuki Motor Gujarat Pvt. Ltd. [Advance Ruling No: GUJ/GAAR/R/2025/29 dated August 22, 2025], held that company facilitating accommodation for permanent employees, provided through a third-party and with nominal deductions is a non-taxable “perquisite”. However, GST applies to similar services for student trainees.
Facts:
Suzuki Motor Gujarat Pvt. Ltd., (“the Applicant”) a manufacturer of passenger cars and parts, registered in Gujarat.
The applicant provided optional dormitory accommodation to its permanent employees and student trainees through agreements with third-party Accommodation Service Providers (ASPs). The ASP raised monthly invoices to the company, with GST at 18%. The company recovered a nominal sum from users (through salary deduction for employees, or charges to trainees).
Accommodation for employees is optional as employees can opt in or out as per policy. The Facility not extended to employees’ families. Thus, the Applicant claims service is a “perquisite” under the employment contract, not a taxable supply under section 7 CGST Act.
Accommodation for student trainees, are considered necessary and not optional and offered as part of training engagement. Thus, Student trainees are not on the company’s payroll. Applicant agrees this is a taxable supply. Applicant through the advance ruling application also sought a ruling on admissibility of ITC on GST paid to ASPs for these services.
Issues:
- Whether GST is applicable on amounts recovered from employees for dormitory accommodation provided via third-party service provider?
- Whether GST is applicable on amounts recovered from student trainees for the same accommodation?
- Whether Applicant is eligible to avail ITC for GST charged by ASP for accommodation provided to employees?
- Whether ITC is admissible for GST charged by ASP for accommodation provided to student trainees?
Held:
The Gujarat AAR in Advance Ruling No: GUJ/GAAR/R/2025/29 held as under:
- Observed that, as per the Applicant company’s policy, accommodation for employees is in the nature of a “perquisite” under the employment agreement, falling within the scope of Schedule III read with Circular No. 172/04/2022-GST.
- Held that, nominal deductions for such optional employee accommodation do not constitute a “supply” under Section 7 of the CGST Act and are not subject to GST.
- Observed that, accommodation provided to student trainees is not a contract-of-service perquisite and trainees are not employees and are not on payroll. The provision is not part of a contractual employer-employee relationship. Therefore, such accommodation constitutes a taxable “supply”; GST is payable on the amounts recovered from student trainees.
- Observed that, for ITC eligibility, Section 17(5)(g) of the CGST Act blocks credit only when the “immediate and ultimate” benefit is for the individual, not when the business receives the ultimate benefit.
- Held that, ITC is admissible to the extent of cost borne by the company for accommodation to permanent employees, and proportionate restriction applies if employees bear part of the cost.
- Held that, ITC is also available for accommodation services given to student trainees, since the Applicant bears the full cost (including on any nominal deduction from trainees).
- The AAR rejected the Revenue’s argument that ITC is blocked except when provision of such facility is statutorily obligatory, holding the restriction does not apply here as services benefit the company’s business.
Our Comments:
This AAR ruling offers clarity for industrial employers offering pooled accommodation through third parties:
For employees, recovery for such facilities does not amount to consideration for a taxable “supply” if rooted in the employment contract; perquisites are explicitly carved out by CBIC Circular No. 172/04/2022-GST and Schedule III.
For trainees, the distinction between “employee” and “trainee” is decisive: trainee accommodation is a supply and taxable under GST law.
Critically, the approach to input tax credit (ITC) is pragmatic: as long as the ultimate benefit is the company’s business and not mere personal consumption, ITC is available (with a proportional adjustment, if costs are shared).
This ruling is in line with prior GAAR like in M/s Cadmach Machinery Pvt. Ltd.[Advance Ruling No. GUJ/GAAR/38/2018] where it held that facilities or benefits provided by an employer to its employees as part of the terms of employment, including accommodation and transport, qualify as “perquisites” and do not constitute a supply under the GST law, thereby attracting no GST liability. Furthermore, ITC on GST charged for such facilities is admissible if used in the course or furtherance of business.
Relevant Provisions:
Section 7 of the CGST Act, 2017
“7. Scope of Supply
For the purposes of this Act, the expression “supply” includes—
(a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;
(b) import of services for a consideration whether or not in the course or furtherance of business;
(c) activities specified in Schedule I;
2. Nothing contained in sub-section (1) shall apply to the following activities or transactions, namely:—
(a) activities or transactions specified in Schedule III;”
Schedule III, CGST Act, 2017:
“Includes the activity:
“Services by an employee to the employer in the course of or in relation to his employment”—which shall be treated neither as a supply of goods nor a supply of services.”
Section 16 of the CGST Act, 2017
“16. Eligibility and Conditions for Taking Input Tax Credit
1. Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified, be entitled to take credit of input tax charged on any supply of goods or services or both—
(a) used or intended to be used in the course or furtherance of business..”
Section 17(5)(g) of the CGST Act, 2017
“17. Apportionment of Credit and Blocked Credits
5. Notwithstanding anything contained in this Act, input tax credit shall not be available in respect of the following:
(g) goods or services or both used for the personal consumption of any registered person;”
Circular No. 172/04/2022-GST dated July 6, 2022
“Clarification No. 5
Whether the supply of various “perquisites” by the employer to employees in terms of employment agreement is subject to GST?
Clarification
Services provided by an employee to the employer in the course or in relation to his employment are neither a supply of goods nor a supply of services under the CGST Act as per Schedule III. Conversely, any perquisites given by the employer to the employee in terms of the employment agreement shall not be liable to GST.”
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