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2023 (9) TMI 164 - AAR - GSTScope of supply - subsidized canteen facility - Part of the cost deducted by the applicant from its employees, who are availing food in the factory - section 7 of the CGST Act, 2017 - HELD THAT:- In terms of Section 7 of the CGST Act, 2017, supply means all forms of ‘supply’ of goods/services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business. The exception being Schedule I, which includes the activities made or agreed to be made without a consideration and Schedule III, which includes activities which shall be treated neither as a supply of goods or services. The applicant’s case is that they employ more than 250 employees including contract workers in their factory and that they have been provided with canteen facility in terms of section 46 of the Factories Act, 1948. The subsidized deduction made by the applicant from the employees who are availing food in the factory would not be considered as a ‘supply’ under the provisions of section 7 of the CGST Act, 2017. However, the aforementioned finding is only in respect of employees i.e. permanent employees. Contract worker’s portion of canteen charges - HELD THAT:- The contractual worker in the factory is primarily engaged for carrying out the activity which is either directly or indirectly related to manufacturing activity. The contractual worker in the instant case, is under scope of definition of ‘Worker” stipulated under Section 2(l) to be read with Section 46 of the Factories Act, 1948 - The applicant has entered into agreement with Contractor to provide them workers in lieu of consideration. The applicant has paid the agreed amount to the contractor and the contractor pays the salary/wages to such contract workers. Therefore, it evident that the instant case does not pass the test of employer-employee relationship as far as the contract workers and the applicant is concerned and therefore does not fall within the ambit of entry 1 of Schedule III of CGST Act, 2017. The applicant has established canteen facilities as mandated under section 46 of the Factories Act, 1948 and supplies food at a subsidized cost through CSP. The supply of food by the applicant is ‘supply of service’ by the applicant to their contractual worker/s. the cost, which is recovered from the salary of contractual worker, as deferred payment is ‘consideration’ for the supply and GST is liable to be paid. The principal employer is also cast the responsibility of providing the canteen facility to the contract labourer and that such responsibility is not solely cast upon the contractor; that the applicant in this case only undertakes to provide & maintain canteen facilities to the contact workers. We have gone through the concerned sections and the rules - it is clear that this is a contract entered into by the applicant with the contractor and not with the contract workers. Even otherwise, the onus shifts to the principal employer [ie the applicant] only in case of failure of the contractor to provide such facility. Nothing is brought on record to exhibit that the contractor who supplied workers to the applicant, in this case, failed to provide the canteen facilities. The averment therefore is not legally tenable. The recovery of amount from contractual worker on account of third party canteen services provided by the applicant would fall within the ambit of the definition of ‘outward supply’ as per section 2(83) of the CGST Act, 2017 and therefore, is liable to tax as a supply under GST. Input Tax Credit - ITC of GST charged by the CSP would be eligible for availment by the applicant - HELD THAT:- ITC will be available to the appellant in respect of food and beverages as canteen facility is obligatorily to be provided under the Factories Act, 1948, read with Gujarat Factories Rules, 1963 as far as provision of canteen service for full time/direct employees working on permanent basis at the factory is concerned. It is further held that the ITC on GST charged by the canteen service provider will be restricted to the extent of cost borne by the appellant only. ITC on canteen charges on the food supplied to contractual worker - HELD THAT:- The provision of Chapter V of CLRA stipulates that labour contractor shall provide the canteen facility to the labour employed by the contractor. Thus, there is no direct mandate to the applicant company to provide canteen facility to the contractual worker - In the instant case the applicant company and contractual workers, do not fall within the ambit of employer-employee relationship and further, it is not obligatory on the applicant company to provide canteen facility to the contractual worker as per provisions of CLRA Act. Section 17(5) allows ITC on food, beverages & outdoor catering only in case it is obligatory under any law for the time being in force. Thus applicant is not eligible of ITC on the food supplied by CSP to contractual worker and it is blocked under Section 17(5) (b) of CGST Act, 2017 - applicant is not eligible to the ITC on food supplied to the contractual worker under Section 17 (5) (b) of CGST Act, 2017.
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