‘18% GST on Adani’s staff cost dues to AAI’

MUMBAI: The Authority for Advance Rulings, Rajasthan (AAR), in the case of Airports Authority of India (AAI) relating to the transfer as a ‘going concern’ of the operations, management and development of the Jaipur International Airport to a special purpose vehicle of Adani Enterprises, has held that transaction is exempt from GST, owing to aspecific notification.
However, the AAR held that reimbursement of staff costs by the Adani SPV to AAI would be towards supply of manpower and hence be subject to GST at 18%.
AAI raised periodical invoices on the Adani SPV for reimbursement of salary/ staff costs. Here, the Rajasthan GST-AAR bench noted that select employees are not part of the transfer of business as a whole, till the time they are absorbed by the new entity.
Further, they have the option to accept or decline the employment offer.
“This ruling identifies a scenario in the overall schemewhich will not enjoy exemption available to transfer of business as a going concern. In case the employees are retained during the joint operation period and the proposed buyer reimburses the salaries of such employees, then this transaction takes the colour of manpower supply services. This is owing to lack of certainty on the date of transfer of business as to which employees shall finally be absorbed by the buyer,” said Anita Rastogi, indirect tax partner, PWC.
This ruling is contrary to the stand taken by the Gujarat and UP AAR benches, which covered the transfer as a going concern of the Ahmedabad and Lucknow airport, respectively, to an Adani Group SPV.
The Rajasthan GST-AAR noted that there is a transfer of business of operation, managing and developing of the Jaipur airport for a period of 50 years. While there is a “temporary” transfer of business, the notification does not specify that only permanent transfers are covered.