TMI Blog2022 (11) TMI 1265X X X X Extracts X X X X X X X X Extracts X X X X ..... ply of food is a 'Supply of Service'. Whether the amount received from the employees is in the nature of recovery and not consideration as the recovered amount is directly paid to the third-party vendor without any profit element in the hands of the Applicant? - HELD THAT:- The running of canteen in the factory of the applicant is in the course of furtherance of business. The applicant has chosen to run the canteen through a third party vendor in the factory. It is also clear that in running of such canteen, the employer, i.e., the applicant is mandated to bear certain costs - Provision of canteen facility and bearing certain costs in running of canteen are mandated on the part of the employer as per the Factories Act. Accordingly, such canteens are provided. It has been established that the supply of food in the canteens are 'Supply of Service' by the applicant - the third party vendor has entered into agreement with the applicant for running of canteen in their unit and is paid service charges which is a supply made by the third-party-vendor to the applicant. The supply of food by the employer, i.e. the applicant to their employees is composite supply of food ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Uttarakhand Goods and Services Tax Act, 2017, within a period of 30 days from the date of service of this order. PROCEEDINGS This is an application under Sub-Section (1) of Section 97 of the Central Goods Service Tax Act, 2017 and Uttarakhand State Goods Service Tax Act, 2017 (hereinafter referred to as CGST/SGST Act) and the rules made there under filed by M/s. Tube Investment of India Limited, 230 231, Gangnouli, Laksar, Haridwar, Uttarakhand-247663 (herein after referred to as the applicant ) and registered with GSTIN 05AADCT1398N1ZW under the CGST Act, 2017 read with the provisions of the UKGST Act, 2017. 2. In the application dated 26.08.2022, the applicant submitted that:- (a) That they are a leading engineering company engaged in manufacture of precision steel tubes and strips, automotive, industrial chains, car door frame and bicycles. And they have a factory in the state of Uttarakhand where in more than 500 workmen (both direct and indirect) are employed. (b) They have entered into agreement with the contractors to operate canteen within the factory premises to provide food to their employees. (c) They recover nominal amount from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licability of a notification issued under the provisions of this Act, (c) Determination of time and value of supply of goods or services or both, (d) Admissibility of input tax credit of tax paid or deemed to have been paid (e) Determination of the liability to pay tax on any goods or services or both (f) Whether the applicant is required to be registered (g) Whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both within the meaning of that term. 5.2 In the present case applicant has sought advance ruling on the determination of the liability to pay tax on services, therefore, in terms of said Section 97(2) ( c), (d), (e) (g) of CGST/SGST Act, 2017, the present application is hereby admitted. 5.3 Accordingly opportunity of personal hearing was granted to the applicant on 13.10.2022. Sh. K Sivarajan, Chartered Accountant and Sh. K Karthikeyan, Company Representative, on behalf of the applicant appeared for personal hearing on the said date and re-iterated the submission already made in their application. Sh. Deepak Brijwal, Deputy Commissioner, Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances which were filed by the applicant for our consideration. We have considered the submissions made by the applicant in their application for advance ruling as well as the submissions made by applicant and his authorized representatives during the hearing. We have also considered the issue involved on which advance ruling is sought by the applicant, relevant facts and the applicant's interpretation of law. Now we proceed by taking up the issue: 8. We have carefully considered all the submissions made by the Applicant. The applicant is a leading engineering company engaged in manufacture of precision steel tubes and strips, automotive, industrial chains, car door frame and bicycles and wherein in a factory in the state of Uttarakhand more than 500 workmen (both direct and indirect) are employed. The applicant recover nominal amount from the employees on monthly basis to provide food to them and for same they have engaged contractors, who operates canteen within the factory premises. The applicant discharge GST @5% on the taxable value which is sum total of the cost of the canteen service provider plus 10% notional mark up. It has also been submitted by the applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on GST on gifts , clarified that the services by an employee to the employer in the course of or in relation to his employment is outside the scope of GST (neither supply of goods nor supply of services). It follows that supply by the employer to the employee in terms of contractual agreement of employment (part of the salary/CTC) is not subject to GST. We are of the opine that the above press release makes it clear that any benefit provided to the employees as part of employment contract would not be subjected to tax under GST, however, in the instant case, firstly it is not mandatorily compulsory to consume the food and secondly the Canteen facility is provided by the applicant in their factory in accordance with the mandate under the Factories Act, 1948; but in lieu of such facility, collects an amount though nominal, fixed as employee cost, therefore, the contention that the activity of supply of food for a nominal charge by them is neither a supply of goods nor a supply of service, is not legally tenable. The next contention of the applicant is that there is no supply between the Applicant and the employees and the Applicant is not engaged in the business of provision o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tablishing canteen, bearing certain mandatory costs in running of the canteen by the employer in as much as the number of workers is above 250, accordingly, and the applicant has established the canteen in their premises and bears certain running cost while collecting the nominal rate, which is an activity in furtherance of their business. In this regard, the definition of 'outward supply', as per Section 2(83) of the CGST Act, 2017, has to be studied. The same is reproduced as below:- 'Outward Supply' in relation to a taxable person, means supply of goods or services or both, whether by sale, transfer, barter, exchange, license, rental, lease or disposal or any other mode, made or agreed to be made by such person in the course or furtherance of business . Thus supply made by a taxable person in the course or furtherance of business is an 'Outward supply'. It has been brought out above, that establishing canteen is in the furtherance of business of the applicant and supply of food to the employees when the same is not contractually agreed, is not an allowance as a part of the employment. Thus, the provision of food in the canteen for a nominal cost i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary as deferred payment does not alter the fact of the service provided and the person providing the said supply. The third party vendor has entered into agreement with the applicant for running of canteen in their unit and is paid service charges which is a supply made by the third-party-vendor to the applicant. The supply of food by the employer, i.e. the applicant to their employees is composite supply of food held as 'Supply of service' as per Schedule-II of the GST Act and the amount collected by the applicant is a 'Consideration' on which GST is liable to be paid. We also find that in the case in hand the applicant has claimed that they are adding 10% mark up cost on the cost of service provider for payment, but they have not provided the components of such mark up cost or what are the constituents, even though they are silent on the issue of cost of the area and the infrastructure, which admittedly includes tables, chairs, utensils, washrooms, wash basins, storage rooms for keeping the cooked food, washing the utensils provided by them to the canteen service providers i.e. contractors. We also find that the electricity and other equipment for running the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings of various advance ruling authorities and appellate authorities, wherein it is held that the collection of employees share and paying to canteen service provider without profit is not a supply. We are of the opinion that prima-fade Advance Ruling extended to one applicant cannot be generalized and applied to all cases. Furthermore, in the case at hand, as brought out in the para supra, the applicant who runs factory, wherein more than 250 workers are employed is mandated to provide the canteen facility in the premises and bear certain costs the provision of food at nominal rate and recovery of such nominal rate is not as per the employment contract. In view of the stated factual matrix of the case, we find the case laws relied upon by the applicant do not have even persuasive values to this case and therefore not elaborated individually. 9. In view of the discussions held above, we rule as under: RULING a. Whether the nominal amount of recoveries made by the Applicant from the employees who are provided food in the factory canteen would be considered as a Supply by the applicant under the precisions of Section 7 of Central Goods and Service Tax Act, 2017 - Yes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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