GST Advance Ruling on Employee Provident Fund and ESI Reimbursements
The Appellate Authority for Advance Ruling rejected a request regarding GST on EPF and ESI reimbursements because the applicant was a service recipient.
- Ruling
- Appeal Order No. 18/AAAR/29/09/2021 dated 29.09.2021
- 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
- Lucknow Producers Cooperative Milk Union asked if GST applies to EPF and ESI reimbursements.
- The Authority rejected the appeal as not maintainable.
- Advance rulings only cover goods or services supplied by the applicant.
- The applicant was a recipient, not a supplier, of the services in question.
In short
The company asked the Appellate Authority for Advance Ruling (AAAR) whether they must pay GST on the money they reimburse to manpower agencies for Employee Provident Fund (EPF) and Employee State Insurance (ESI) contributions. The Authority did not answer the tax question because they decided they did not have the legal power to hear this specific case.
What has changed
How it worked before
Businesses often seek advance rulings to clarify tax liabilities on various payments, including reimbursements to vendors, hoping for a definitive answer that protects them from future disputes.
What has changed
The Authority clarified that under Section 95 of the Goods and Services Tax (GST) Act, they can only rule on transactions where the applicant is the supplier of goods or services. Because the company was the recipient of the manpower services, the Authority refused to provide a ruling, effectively closing this door for service recipients.
Who this affects
Businesses that hire manpower agencies or other service providers and want to clarify the tax treatment of reimbursements for statutory payments like EPF and ESI.
An example
Imagine a construction firm that pays a security agency and wants to know if they owe GST on the agency's EPF contributions. They might consider filing for an advance ruling to get clarity. Based on this decision, the Authority would likely reject their application because the construction firm is the recipient of the security service, not the supplier.
What you should do
Understand that an advance ruling is not a general legal opinion. This decision is only binding on the specific company that asked the question and its own tax office. If you are a service recipient, do not assume you can use the advance ruling process to settle disputes about your vendors' invoices.
If you do nothing
If you assume this ruling applies to you, you may waste time and money filing an application that will be rejected. A tax officer is not bound by a ruling issued to another business. If you rely on an incorrect interpretation, you could face penalties and interest charges during a future audit.
The terms explained
- Advance Ruling
- A formal decision by tax authorities on how GST applies to a specific transaction proposed or undertaken by a business.
- Not maintainable
- A legal term meaning the court or authority refuses to hear the case because it does not meet the necessary procedural requirements.
- Service recipient
- The person or business that receives and pays for a service provided by another party.
The ruling in detail
Appellate Authority for Advance Ruling
M/s LUCKNOW PRODUCERS COOPRATIVE MILK UNION LTD
Appeal Order No. 18/AAAR/29/09/2021 dated 29.09.2021 · Uttar Pradesh
Questions before the authority
- GST Liability on reimbursement of Employee Provident Fund & ESI.
Facts
The Appellant is a registered cooperative society engaged in processing milk and milk products. They engage manpower supply agencies and reimburse them for statutory liabilities like EPF and ESIC. The Appellant sought an advance ruling on whether GST is payable on these reimbursements.
Ruling
| Question | What the authority ruled |
|---|---|
| GST Liability on reimbursement of EPF & ESI | Not maintainable The appeal was rejected without discussing the merits of the case. |
The Appellate Authority rejected the appeal as not maintainable. They concluded that the transactions in question do not relate to the supply of goods or services undertaken or proposed to be undertaken by the appellant. Consequently, the matter falls outside the purview of the Advance Ruling Authority.
Reasoning
The Authority observed that the applicant is a recipient of services and not a supplier in the context of the impugned transactions. Under Section 95 of the CGST Act, an advance ruling is limited to questions regarding the supply of goods or services undertaken or proposed to be undertaken by the applicant. Since the applicant admitted they are not covered under the reverse charge mechanism and are merely a service recipient, the application was deemed **outside the purview of mandate** given to the Advance Ruling Authority. Therefore, the appeal was rejected as **not maintainable**.
Provisions relied on
- Section 95 of the CGST Act, 2017
- Section 97 of the CGST Act, 2017
- Section 100 of the CGST Act, 2017
For the practitioner
This ruling serves as a procedural reminder that the Advance Ruling mechanism is strictly limited to questions concerning the applicant's own supply of goods or services. It does not provide a forum for service recipients to seek rulings on the taxability of their vendors' invoices. Practitioners should ensure the applicant is the supplier of the transaction in question before filing for an advance ruling.
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_18_2021-22_29.09.2021_uppcmul.pdf
Legibility of the scan, as read: high.
Prepared 13-10-2026.
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