GST on Employee Car Parking Charges: Pure Agent Status Explained
The Appellate Authority for Advance Ruling ruled that recovering parking costs from employees is a supply, but the taxable value is NIL if you act as a pure agent.
- Ruling
- Order No. 11/AAAR/16/03/2020 dated 16.03.2020
- Authority
- Appellate Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- The company asked if recovering parking costs from employees is a taxable supply.
- The authority ruled that this recovery is a supply of service.
- The taxable value is NIL if the company acts as a pure agent.
In short
The company asked the Appellate Authority for Advance Ruling (AAAR) if collecting money from employees for car parking, which the company pays to the building owner, counts as a taxable service under Goods and Services Tax (GST). The authority decided that while this is a service, the value is zero if the company acts strictly as a 'pure agent' for its employees.
What has changed
How it worked before
Businesses were uncertain whether recovering exact costs from employees for third-party services like parking should be treated as a taxable supply or a simple reimbursement.
What has changed
The authority confirmed that this activity is a supply of service. However, by meeting the conditions of a 'pure agent' under Rule 33, the taxable value becomes NIL. This means no GST is payable on the recovered amount, provided the company does not make a profit and acts only as a facilitator.
Who this affects
Employers who pay for third-party services like parking or transport on behalf of their employees and recover the exact cost from them.
An example
A marketing firm rents parking spots from a building owner for its staff. The firm pays the owner and collects the exact same amount from employees without adding a service fee. Under this ruling, the firm can claim a NIL value for this supply if it follows the pure agent rules. If the firm added a management fee, the pure agent status would be lost, and GST would apply to the entire amount.
What you should do
Review your arrangements to see if you meet the strict criteria of a pure agent. Remember that an advance ruling only binds the company that asked and its specific tax office; it is not a general law for all businesses.
If you do nothing
If you assume this ruling applies to you and stop paying GST without meeting the strict pure agent criteria, a tax officer may issue a demand for unpaid tax, interest, and penalties. You could face a lengthy legal dispute to prove your specific arrangement qualifies for the NIL valuation. Always consult your tax advisor before changing your GST treatment based on another company's ruling.
The terms explained
- Pure Agent
- A person who enters into a contract to act as a representative for another to incur costs, does not use the service for their own benefit, and recovers only the actual amount paid.
- Supply of Service
- Any activity or transaction involving the provision of services for a consideration, which may attract GST.
- NIL Valuation
- A situation where the taxable value of a supply is zero, meaning no GST is calculated or paid on that transaction.
The ruling in detail
Appellate Authority for Advance Ruling
M/s Ion Trading India Private Limited
Order No. 11/AAAR/16/03/2020 dated 16.03.2020 · Uttar Pradesh
Questions before the authority
- Whether amount recovered from the employees towards car parking charges payable to Shantiniketan Properties Private Limited (building authorities), would be deemed as Supply of service by the applicant to its employees?
- If the first question is answered in affirmative, whether the value of aforesaid supply would be NIL, being provided in the capacity of a Pure Agent? If valuation is not accepted as NIL, what would be the value of such supply?
- If GST is payable on the such amount recovered from the employees, whether the GST paid by the applicant to building authorities towards car parking charges would be admissible as input tax credit against supply of car parking services to employees?
Facts
The appellant is a software development company that facilitates car parking spaces for its employees by procuring them from a third-party building owner. The appellant pays the lease charges to the building owner and recovers an equivalent amount from the employees using the parking spaces. The appellant does not claim input tax credit on these lease charges and maintains that it acts merely as a facilitator for its employees.
Ruling
| Question | What the authority ruled |
|---|---|
| Whether recovery of parking charges is a supply of service | Yes Affirmative |
| Whether value of supply is NIL as a pure agent | Yes Subject to fulfillment of conditions prescribed for pure agent |
| Admissibility of input tax credit | Redundant Question became redundant as the value of supply was held to be NIL |
The Appellate Authority ruled that the recovery of parking charges from employees constitutes a supply of service by the applicant. However, it further held that the value of this supply is NIL, provided the applicant fulfills the conditions prescribed for acting as a pure agent. Consequently, the third question regarding input tax credit became redundant.
Reasoning
The authority determined that the activity falls under Schedule II of the CGST Act as a supply of services related to land and building. It then evaluated the claim of 'pure agent' status under Rule 33 of the CGST Rules, 2017. The authority found that the appellant acts as a pure agent because it procures the parking facility on authorization from employees, does not use the space for its own interest, and recovers only the actual amount paid to the building authority. Therefore, the **value of supply is NIL** under the pure agent valuation mechanism.
Provisions relied on
- Section 7(1) of the CGST Act, 2017
- Schedule II of the CGST Act, 2017
- Rule 33 of the CGST Rules, 2017
For the practitioner
This ruling provides a favorable precedent for employers who facilitate third-party services for employees on a cost-recovery basis without a profit margin. It confirms that such arrangements can qualify for **NIL valuation** under the pure agent provisions, provided strict adherence to Rule 33 conditions is maintained. Practitioners should note that this decision hinges entirely on the factual demonstration of the 'pure agent' criteria.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/2024-02/up_aaar_11_2019-20_16.03.2020_itipl.pdf
Legibility of the scan, as read: high.
Prepared 13-10-2026.
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