AAR Ruling:- Accommodation provided to Managing Director & General Manager on hotel stay is not eligible for ITC

Advance Ruling Authority (AAR) Maharashtra in case of Posco India Pune Processing Center Private Limited vide its 36/2018-19/B- dated 7th September 2018 has stated that accommodation provided to GM & MD on hotel stay is not eligible for ITC
The applicant has reported that as per POSCO group policy, key personnel like the Managing Director (MD) and General Manager (GM) are deputed to the Indian POSCO group companies from POSCO overseas entity. The MD and GM are provided accommodation in a hotel and the cost of the same is part of the cost to the Applicant and is included as perquisites in the salary as per the provisions of Income Tax Act, 1961. The Applicant wants to seeks Ruling on whether they can claim ITC in respect of the GST charged by the hotel on the stay expenses of the MD/GM as per the provisions of the GST Law
AAR noted that providing residential accommodation in a Hotel is not in furtherance of their business. It was observed that the MD/GM could have been provided with any other residential accommodation and still would have performed their duties for the applicant. In the case of residential accommodation, as per the provision of the GST laws, GST is not liable to be paid on the rent received. “It is the intention of the Government not to tax the rent paid by any person when the rent is paid for any place of residence.
In this case, if the MD/GM were staying at any residential place or society, the applicant would have paid only rent without GST. It is seen that the applicant has made various submissions supporting their contention that Input Tax Credit is admissible in respect of GST paid for the hotel stay in case of rent-free hotel accommodation provided to GM/MD of the company. However in view of the above discussions we find that the Hotel Accommodation is being used by the applicant as a residential premises of their MD/GM which is for the personal comfort of both and therefore in view of the provisions of Section 17(5)(g) we hold that they are not eligible to claim the ITC for the same.
Further, the AAR also ruled that the company isn’t eligible to claim ITC of GST paid on health insurance provided to employees if it is partly recovered from them subsequently. The ruling said that the company was creating this fiction of providing health insurance to their employees only to avail 100% ITC of payments made to the insurance companies.
AAR held that since there is no supply of services there is no question of time and value of the supply. And therefore, the applicant cannot claim the input tax credit of GST paid to the insurance company.

*FinTax*
📲 91 9892094003
📥 fintax.ca@gmail.com