GST is payable on complete billing amount including employer portion of EPF & ESl Amount

West Bengal Authority for Advance Ruling in the matter of Ex-servicemen Resettlement Society [Order no. 09/WBAAR/2021-22 dated 30/09/2021] has held that GST is payable on the entire billing amount, including the Employer’s contribution of Employees Provident Fund ("EPF") or Employee State Insurance ("ESI"), if any, falling within the complete billing amount.

Facts

Ex-servicemen Resettlement Society ("Applicant") is a registered society providing security services and scavenging services (Karma Bandhus) to different Medical Colleges & Hospitals.

As per labor laws of the Government of West Bengal, the Applicant claims Minimum Wage + Employer Portion of 13% EPF plus 3.25% ESI and charges tax at the rate of 18% leviable under the Central Goods and Services Tax Act, 2017 ("the CGST Act") on gross bill amount in every month for providing said services to the Government Hospitals.

The Audit Authority (Indian Audit and Accounts Department, West Bengal) in course of audit of Bankura Sammilani Medical College and Hospitals has raised the objection of excess payment of GST upon the observation that ‘GST’ must be payable only on Management Fees/Services Charges.

The Applicant has sought the advance ruling on whether employer portion of EPF and ESl amount of the bill are exempted for paying GST.

Issues

1. Whether GST to be payable on Management Fee/Administrative charges only or otherwise complete billing amount?
2. Whether employer portion of EPF & ESl amount of the bill are exempted for paying GST?

Held

The West Bengal Authority for Advance Ruling in the matter of Order no. 09/WBAAR/2021-22 dated 30/09/2021 held as under:

• That sub-section (2) of Section 15 of the CGST Act clearly specifies the elements that will form a part of value of supply, sub-section (3) of Section 15 of the CGST Act excludes the elements that are not to be included in the value of supply.
• The EPF and ESI contributions by the Employer do not fall within the exclusions defined under sub-section (3) of Section 15 ibid.
• Therefore, no room is left to deduct any amount like management fee, employer portion of EPF and ESI for the purpose of determination of value of supply under Section 15 of the CGST Act meaning thereby in the instant case, tax is leviable under Section 9 of the CGST Act on the entire billing amount.
• Hence, ESI and EPF contributions of the Employer, if any, enumerated in the billing amount are not exempted from GST. The entire billing amount shall be deemed to be the value of supply.

Relevant provisions

Section 15 of the CGST Act

"15. Value of taxable supply.

(1) The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply.

(2) The value of supply shall include - 

(a) any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this Act, the State Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act, if charged separately by the supplier;

(b) any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both;

(c) incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services;

(d) interest or late fee or penalty for delayed payment of any consideration for any supply; and

(e) subsidies directly linked to the price excluding subsidies provided by the Central Government and State Governments.

Explanation. — For the purposes of this sub-section, the amount of subsidy shall be included in the value of supply of the supplier who receives the subsidy.

(3) The value of the supply shall not include any discount which is given - 

(a) before or at the time of the supply if such discount has been duly recorded in the invoice issued in respect of such supply; and

(b) after the supply has been effected, if—

(i) such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices; and

(ii) input tax credit as is attributable to the discount on the basis of document issued by the supplier has been reversed by the recipient of the supply."