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2022 (11) TMI 1265 - AAR - GSTLevy of GST - Supply or not - nominal amount of recoveries made by the Applicant from the employees who are provided food in the factory canteen - eligibility for input tax credit on GST charged by the Canteen Service Providers for providing the catering services of the factory where it is obligatory for the Applicant to provide the same to its employees as mandated under the Factories Act, 1948 - input tax credit on GST charged by the Canteen service providers. Supply or not - HELD THAT:- The 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 is a 'Supply' for the purposes of GST. Schedule II to the CGST Act, 2017 describes the activities to be treated as supply of goods or supply of services - the supply 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 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. Eligibility of ITC on the GST paid by the applicant on the services of canteen services by the canteen service provider - HELD THAT:- The Input Tax Credit on Goods and Services Tax paid on Canteen Facility is barred credit u/s 17(5)(b)(i) of the Central Goods and Services Act, 2017 and hence inadmissible. The two clauses in Section 17(5)(b)(i) and 17(5)(b)(iii) of the CGST Act, which governs the supply of goods and services, are not related by the punctuation used at the end of the provisions. “Colons and semicolons are two types of punctuation,” according to the concept, and “Semicolons are used to unite two independent clauses/sub clauses, or two complete thoughts that might stand alone as entire sentences.” Hence it can be said that ITC is not allowed on canteen charges even though it is obligatory under any other law. The Authority for Advance Ruling, Gujrat in the case of M/s Tata Motors Limited [2021 (8) TMI 735 - AUTHORITY FOR ADVANCE RULING, GUJARAT] held that Input Tax Credit on Goods & Services Tax charged by canteen service provider will not be available even when the same is obligatory in terms of Factories Act, 1948 - In the case at hand, as brought out, 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, the case laws relied upon by the applicant do not have even persuasive values to this case and therefore not elaborated individually.
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