2024 (3) TMI 738 - AUTHORITY FOR ADVANCE RULING, TAMILNADU

Levy of GST - Composite supply or not - recovery of nominal amount by the Applicant from employees for availing the facility of Canteen at the factory premises - recovery of premium of Medical Insurance Policy from the employees for them and their dependents at actuals under the HR Policy - recovery of nominal amount from employees for using of transportation facility to and from the factory and office premises provided to the employees in the course of employment - facility of Car extended to the employees of the Applicant-Company in the course of employment - ITC on facility of canteen service provided to employees by applicant as statutory obligation under Factories Act - ITC on on expense incurred for the well-being of employees such as vaccination and other benefits to avoid any disruption in Business - ITC on GST charged for gardening expenses of the Applicant-Company.

Whether GST is applicable on recovery of nominal amount by the Applicant from employees for availing the facility of Canteen at the factory premises? - HELD THAT:- The canteen service provided by the applicant company on its own account to its employees, is a composite supply which gets treated as a supply of service in terms of Entry No. 6 of Schedule II to the CGST Act, 2017 - the amount charged on the employees by the applicant, whether nominal or otherwise, is to be treated as the consideration for such supply of canteen service on its own account to its employees on which taxes under GST is liable to be discharged by the applicant/employer.

Whether Input Tax Credit is available on facility of canteen service provided to employees by applicant as statutory obligation under Factories Act - HELD THAT:- GST charged on the inward supplies received, if any, in relation to the provision of food to the employees by the applicant is admissible as ITC to them, provided the number of direct employees in the establishment is more than 250. Further, it is also held that while availing such ITC, the proportionate credit to the extent of cost recovered from such employees is required to be reversed by the applicant/employer.

Whether GST is applicable on the recovery of premium of Medical Insurance Policy from the employees for them and their dependents at actuals under the HR Policy - HELD THAT:- The applicant is just a facilitator in the transaction relating to insurance, and practically no supply of service is made in the course or furtherance of business by the applicant in the instant case. Since the provision of this insurance cover to the employees and their dependents is reportedly provided in terms of the HR policy of the Applicant-Company, the same is to be treated as a contractual agreement entered into between the employer and the employee in accordance with clause 1 of Schedule III of the CGST Act, 2017, which is neither a supply of goods nor a supply of service. As per Section 7(2) of the Act, ibid, Schedule III supersedes Schedules I and II, which means that even if it is considered as a supply under Section 7(1), no tax will be payable in view of the provisions contained in clause 1 of Schedule III - no supply of service by the applicant is present in the instant case involving the collection and remitting of insurance premium to the insurance companies, and therefore GST is not liable to be discharged on such cases.

Whether GST is applicable on recovery of nominal amount from employees for using of transportation facility to and from the factory and office premises provided to the employees in the course of employment? - HELD THAT:- In the instant case, the cab operators are the actual services providers, and that the applicant is not involved in any supply of transportation service to the employees, Further, in the instant case the applicant themselves pay up the actual cost of transportation to the service providers, i.e., the cab operators, but recovers only a nominal portion of the transportation cost from the employees, whereby the remaining portion of the transportation cost is borne as expenditure by the applicant. Further, since the nominal amount recovered from the employees forms part of the total cost reimbursed to the transportation service providers, no consideration actually accrues to the applicant in the instant case as well - no supply of service by the applicant is present in the instant case involving the transportation facility extended to the employees through a third party, and therefore GST is not liable to be discharged on such cases.

Whether GST is applicable on facility of Car extended to the employees of the Applicant-Company in the course of employment? - HELD THAT:- In the instant case, the Applicant-Company reportedly pays the lease premium directly to car leasing company, and the overall salary cost of the related employees will get reduced to the extent of cost incurred by Applicant-Company to extend the expense incurred in relation car facility provided to employees for office purpose. However, wo notice that the circumstances relating to the car lease premium differs basically from the other cases discussed above in view of the fact that these types of car facility are normally provided to a few specific employees of the organisation, and that they are not general in nature like the canteen facility, insurance facility or the mass transportation facility - the cars are normally booked under the name of the company/organization, and it remains with them for a specific period, or until the lease period is over. Therefore, when the applicant provides the said service to their employees on their own account, and when the clement of ‘perquisite’ is absent in the instant case, it is held that under the circumstances of the case, GST is applicable on the facility of Car extended to the employees of the Applicant-Company, even if it is in the course of employment.

Whether Input Tax Credit can be availed on expense incurred for the well-being of employees such as vaccination and other benefits to avoid any disruption in Business? - HELD THAT:- As per Section 17(5)(b) of the CGST Act, 2017, the supply of goods or services or both in relation to health services cannot be availed as ITC, unless it is obligatory for an employer to provide the same its employees under any law for the time being in force. We notice that inspite of their claim that providing medical facility is part of service contract, the applicant has not adduced any details or documentary evidence in support of the same, and as a result no further discussions could be made in this regard. Moreover, even in the event of considering the same as an obligation or responsibility on the part of the employer, the same should be mandated under any law for the time being in force, and this aspect has not been substantiated by the applicant - the only respite available to the applicant in the form second proviso to Section 17(5)(b) of the CGST Act, 2017, also stands exhausted as discussed above, and therefore it is held that Input Tax Credit cannot be availed on the expense incurred for the wellbeing of employees such as vaccination and other health benefits extended to them.

Whether Input Tax Credit is available on GST charged for gardening expenses of the Applicant-Company? - HELD THAT:- The definition of ‘input service’ provided under Rule 2(1) of the erstwhile CENVAT Credit Rules, 2004 was already wide enough to encompass the availability of credit on such gardening services, as it contained the words, "whether directly or indirectly, in or in relation to the manufacture". Whereas the definition of ‘input service’ provided under Section 2(60) of the CGST Act, 2017, is much wider as it contains the words "in the course or furtherance of business - Having been mandated by the Tamil Nadu Pollution Control Board under Section 21 of the Air (Prevention and Control of Pollution) Act, 1981, as amended in 1987 (Centred Act 14 of 1981), and the rules and orders made thereunder, as discussed in detail above, it is observed that gardening and maintenance of green belt in and around the unit’s premises is an activity in the course or furtherance of business that is mandatorily required to be carried out by the applicant - ITC is available on the input services received by the applicant in the instant case, in relation to gardening activities carried out within the factory premises.