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2018 (10) TMI 748

Input tax credit - scope of blocked credit - various goods and services used for maintenance of applicant’s township, guesthouse, hospital, horticulture in its ordinary course of business - section 17(5) of CGST Act. - Whether the applicant is entitled to take input credit of tax paid on various goods and services used for maintenance of applicants’s township, quest houses hospitals and horticulture for paying output tax? - Held that:- Some of the services are exclusively in relation to the residential colony, some are in relation to the plant, some are in relation to the guest house and transit house, some are for use in residential colony as well as in the plant while some of the services like urban plantation, provision of drinking water at picnic spot, raising of seedling, and general plantation are neither for the plant nor for the residential colony. The applicant might be doing those activities while discharging some obligation but such activities are not for or in relation to the core business. Some other activities like contract for running a pharmacy outlet simply for dispensing medicine and other allied product free of charge. This is a clear case of supply witho .....

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ents. Credit of such input services are as such blocked in clause b of Sub section 5 of section 17 of the OGST and CGST Act - credit not allowed. - ARN 02/ODISHA-AAR/2018-19 - Dated:- 28-9-2018 - SRI ANAND SATPATHY, AND SRI NILANJAN PAN, MEMBER Present for the Applicant: P.K, Sahu, Advocate Subject: GST Act, 2017-Advance Ruling in respect of entitlement to take credit of input tax paid on various goods and services used for maintenance of applicant s township, guesthouse, hospital, horticulture in its ordinary course of business. 1.0 M/S National Aluminium Company Ltd., Nalco Bhawan, PO. Nayapajli, Bhubaneswar- 751013 (hereinafter referred to as Applicant ) assigned with GSTIN number 21AAACN7449M1Z9 have filed an application on 19.07.2018 under Section 97 of CGST Act, 2017, OGST Act, 2017 read with Rule 104 of CGST Rules 2017 & OGST Rules,2017 in Form GST ARA-01 seeking an advance ruling in respect of its entitlement to take credit of input tax paid on various goods and services used for maintenance of applicant s township, guest house, hospital, horticulture in its ordinary course of business. They enclosed copy of challan as proof of payment of ₹ 10,000/bearing CIN No. .....

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7(5) of CGST Act. It was also stated that it would be entitled to take credit of tax paid on works contract service only for activities, for which the expenditure is claimed as revenue expenditure and not capitalized. It would not claim any credit with respect to services for which the expenditure is capitalized. 3.0 Personal Hearing was fixed on 29.08.2018 under due intimation to the applicant, the jurisdictional officer of State GST & jurisdictional officer of Central GST (intimated through their respective Commissionerate along with a copy of application and the written submission of the applicant). The applicant appeared through its Advocate (Sri .P K Sahu) and Representative( Sri P.Suna, DGM, Nalco) and the jurisdictional officer of State GST & jurisdictional officer of Central GST appeared in person. Sri P. K. Sahu, Advocate re-iterated the submissions already furnished in the annexures to the application. During personal hearing, the applicant was asked to state a) whether the applicant is into the supply of Health Service, Dwelling/Accommodation service etc b) whether maintenance of township, Guest house, Hospital for the welfare of the employees would be a supply b .....

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personal hearings. We also considered the questions and issues on which advance ruling is sought for by the applicant, relevant facts having bearing on the question/issue raised, the applicant s understanding/interpretations of law in respect of the issue. The jurisdictional officer of State GST and jurisdictional officer of Central GST filed written counter countering the averments of the applicant which was also considered and a copy thereof was supplied to the applicant for reference and counter, if any. 4.1 The Applicant has sought advance ruling and filed form GST-ARA-01 before the Odisha Authority for Advance Ruling on 19.07.2018.The only question asked in the said application is Whether the applicant is entitled to take input credit of tax paid on various goods and services used for maintenance of applicants s township, quest houses hospitals and horticulture for paying output tax . 4.2 The moot issue before us is to decide and to give a ruling on whether the applicant is entitled to take input credit of tax paid on various goods and services procured for use in maintenance of the townships, guest houses, hospitals and horticulture established by the applicant. In fact, rul .....

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the core business of the applicant i.e. mining of bauxite, refining or manufacturing aluminum ingot. Some of the activities seem to be in the course of discharging corporate social responsibilities (CSR), but certainly not in the course of business or furtherance of business. The services listed at Sr No. 54 and 55 i.e. mass plantation at M&R Complex, Nalco, Damanjodi can be held as in the course of business since the applicant is receiving forestry service for plantation within the refinery complex. ii) Waste collection and Sanitation services. Door to door garbage collection & disposal at designated place, fogging operation to control mosquito and eradicate larva in plant and township, Nalco Damanjodi, operation and maintenance of solid waste treatment at plant at Nalco, cleaning of public building including toilets at Nalco Township Damanjodi, up keeping cleaning and ensuring hygienic conditions of Nalco Hospital at Damanjodi, operation end maintenance of Bio -Medical waste management equipments of Nalco, contract for cleaning of linens of Shaila Niwas and annex at Nalco, Damanjodi. The services listed at Si No .03 is being availed exclusively for residential colony. Ser .....

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residential colony. The service listed at Sl No.20 is in relation to the Alumina Plant. The service listed at Sl No.23 i.e. provision of drinking water at picnic spot is not at all in the course of or for the furtherance of business. The service listed at Sl No.29 is in relation to the residential colony whereas the service listed at S' No.30 i.e. lighting maintenance of Alumina Plant township at Damnajodi is partly in relation to the plant and partly in relation to the residential colony. The service listed at Si No 31 i e AMC of Power Fencing System is definitely in relation to the security of the plant and hence part of business operation. The services listed at Sl No. 32 arid 33 are in relation to the electrical maintenance of the township and the service listed at Sl. No, 35 is in relation to both the residential colony as well as the plant. The service listed at Sl. No.34 i.e. maintenances of 132KV Switch yard, greed transformer system at Damanjodi is predominantly for the plant use. vi) Painting Services- Periodical Painting for the building inside at NALCO, Damanjodi, Periodical Painting for residential Quarters & Public Building at Sector-I of NALCO Township & .....

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. for the following reasons. a) The input and/or input services received by the applicant for the activities such as maintenance and repair of the townships, guest houses, hospitals and horticulture have no nexus to the manufacturing activity undertaken by the applicant. The said activities are neither relating to business nor relating to manufacture of final product and its supply. The said activities may be welfare activities undertaken while carrying on the business but to qualify as input service; the activity must have nexus with the business of the applicant. The expression in course or furtherance of business appearing in Section 16(1) of the GST Act refers to activities which are integrally related to the business activity and not welfare activities. b) The activity of maintenance and repair of applicant's residential township / colony, guest house, hospitals including the horticultural activity are broadly used by the employees. The services, availed by the applicant are awarded on contractual basis which ere in the nature of repairs and maintenance of its assets, contained in such township, guest house or hospitals. The residential township or colonies are located out .....

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ction 2(119) of the OGST Act / the CGST Act Sub-section (5) of Section 17 of the Central Goods and service Tax Act, prescribes clauses (a) to (i) covering inputs or input services, the tax paid on which is not available as credit even though they have been used in the course or furtherance of business. As per clause (c) and (d), and the Explanation thereto under sub-section (5) of section 17 the tax credit on works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service is not allowed or blocked. Further, the tax credit on goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business is blocked. From a plain reading of the provisions of the above referred sub-clauses along with the Explanations, it reveals that the tax credit on input and/or input services received by the applicant for the referred activities are in the form of works contract service, for repairs and mainte .....

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nt and maintaining the solid waste treatment plant seems to be for treating the solid waste of the plant. To sum up the services are varied in nature and intended for partly business use (to the extent intended for the plant, plant area or plant building) and partly non business use (to the extent intended for use outside the applicant area). Some of the services ere for use in the residential colony while some other are for use in the hospital and guest houses. Undeniably the applicant is providing services to its employees by way of residential accommodation in the colony, temporary accommodation in the guest houses and is dispensing health services to its employees and others. In a press release issued on 10th of July, 2017 by the CBIC, it was clarified that perquisites provided to employees in terms of employment contract are not chargeable to GST. In the said press release it was also clarified that gifts of value exceeding ₹ 50,000/- by the employer to an employee will constitute a supply chargeable to GST. Conversely, in Para I of Schedule III of the Act, it has been made clear that service by an employee to the employer in the course of or in relation to his employmen .....

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her clarification we consider it appropriate to discuss the amendment of Section 17 (5) as brought in the CGST (Amendment) Act, 201 8(yet to be made effective) wherein clause (a) and (b) of sub-section (5) of Section 17 have been substituted with a Proviso in the substituted clause (b) providing for input tax credit in respect of such goods or services or both, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force. In the provisions of law, as its stand today, there is no such provision providing for input tax credit in respect of goods and/or services procured by an employer for supply to the employees for discharging any statutory obligation. In the absence of such provisions, input tax credit shall not be available to the applicant in respect of the services and goods procured for maintenance of hospital and pharmacy outlet as per the current provisions in the OGST/CGST Act. Detailed observation on the services availed by the applicant in relation to the hospitals and pharmacy outlets have been made para 4.3. 5.2 Establishing, maintaining and furnishing guest houses including landscaping by way of gardening or other .....

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rdening within the plant area including mining area and the premises of other business establishment as mentioned above will qualify for input service credit Observations on specific contracts as listed in Annexure-A have been made in Para 4.3, 5.4 We have gone through the various judicial pronouncements cited by the applicant in support of his claim. With great respect to the principles of law laid down in those decisions rendered in peculiar facts and circumstances of each case. we have no hesitation to say that the facts of the instant case are different and distinguishable. Some of these decisions are rendered under the Income Tax Act and cannot be inferred in the context of the provisions of the OGST Act / CGST Act. Accordingly, the present ruling is issued by examining the nature and purpose of each of the services listed in Annexure-A with reference to the relent provisions in the OGST/CGST Act. The applicant may claim input tax credit in respect of the input services to the extent allowed above. Ruling In view of the foregoing discussions, the application for advance ruling is disposed accordingly The applicant or the jurisdictional officer, if aggrieved by the ruling given .....

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