TMI Blog2021 (7) TMI 654X X X X Extracts X X X X X X X X Extracts X X X X ..... inistry of Defence. Government of India. The applicant manufactures various types of ammunitions and explosive and non-explosive components and supplies the same, mainly to Indian defence and military forces and also to sister Ordnance factories that use such goods for their production and manufacturing process - when the output is transferred to sister Ordnance factories units of armed Forces as per order, the consideration for transfer is fixed by OFB and is booked in the financial accounts of OFCh organization and the adjustment is done through book transfer. Money consideration is involved only for a small portion of the produce, where the goods are sold directly to units under Ministry of Home affairs, paramilitary forces like BSF. units of state police. defence PSU s and private entities. The Applicant is fulfilling all the conditions stipulated for being Central Government , as provided under clause (8) of section 3 of the General Clauses Act. 1897 read with Article 53 Article 77 of the Constitution of India, since the Applicant is functioning under the Department of the Defence Production. Ministry of Defence. Government of India, and all its activities are carried ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acture of ammunition. The aforesaid goods manufactured by the applicant are rightly covered under Entry Sr. No. 21. Heading 9965 or 9967. clause (h) of the Notification No. 12/2017-C.T.- (Rate) dated 28.6.2017 and therefore the said exemption is available to applicant s transaction in respect of transport of military or defence equipments. Whether availing of eligible Input Tax Credit on inputs input services relating to the main business activity of manufacturing is allowed against GST liability on renting of immovable property (which is an ancillary business activity)? - N/N. 3/2018 Central fax (Rate) dated 25.1.2018 - HELD THAT:- Considering the notification and activity and status of the applicant as a Government , it has no liability to pay GST on said supply which is liable to be paid under reverse charge mechanism by the recipient of the service. As there are no taxes payable on outward supply the question of availing ITC does not arise as per the provisions of ITC under Sections 17(2) of the CGST Act. 2017. Therefore, the Applicant is not entitled to avail ITC in respect of such expenditures. Whether Input Tax Credit is allowable in respect of food and bevera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8/2019-20/B-28 - - - Dated:- 13-7-2021 - SHRI RAJIV MAGOO, AND SHRI. T. R. RAMNANI, MEMBER PROCEEDINGS (Under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017) The present application has been filed under Section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as the CGST Act and MGST Act respectively] by M/s. SENOR GENERAL MANAGER ORDNANCE FACTORY, the applicant, seeking an advance ruling in respect of the following questions. 1) Is audit by a Chartered Accountant or Cost Accountant under section 35(5) of the CGST Act, 2017 applicable to our organization for- a) F.Y 2017-18? b) The 2018-19 succeeding Financial years 2) Whether the exemption to a defence formation for preparation and generation of E-way bills is applicable to Ordnance factories other Central Government Public Sector Undertakings (PSU s) that function under the Ministry of Defence, Government of India? 3) Whether exemption on payment of GST on transport of military or defence equipments through a goods transport ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o units under Ministry of Home affairs, paramilitary forces like BSF units of state police, defence PSU s and private entities 3) The goods are sent in finished condition to proof establishments (such as PXE. Balasore. CPF Itarsi) for testing purpose. Such proof establishments are located outside the factory premises across the country and they also function under the Ministry of Defence. Government of India. Such sample goods are destroyed during testing process and the value of such destroyed goods is apportioned as Overheads on the final goods that are manufactured. 4) Apart from sale/transfer of manufactured goods, the applicant factory also supplies the scrap generated during the manufacturing process and other used and waste goods to private entities through auction process. 5) Employees of the factory from all over the country come down and reside in the factory estate to help run the factory and it is the statutory obligation of the factory to maintain and upkeep their residential units along with maintenance of estate including playground community hall, hospital, roads, school etc. 6) Expenditure on maintenance of Guest houses for stay of various perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to proof establishments for testing of its goods. These proof establishments are also under the management of the Ministry of Defence (MOD) of the Government of India. So. the aforementioned exemption should be applicable when OFCh causes movement of goods to such proof establishments since the consignee in this case is a defence formation under the Ministry of Defence . Lastly, defence Public Sector Undertakings. Defence research Organisation (DRDO) or any other organisation under the management of the Ministry of Defence. Government of India should also get covered under the term defence formation under the Ministry of Defence and the aforementioned exemption should be applicable when OFCs causes movement of goods to such proof establishments since the consignee in this case is a defence formation under the Ministry of Defence . III) For Question No. 3: Whether exemption on payment of GST on transport of military or defence equipments through a goods transport agency applicable to goods transported by applicant organisation As per Sr. No. 21 of the Notification No. 12/2017-Central Tax (Rate), Services provided by a goods transport agency by way ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Department of Defence Production. Ministry of Defence. vi) Transport to private entities: - The factory is also engaged in Civil Trade where it supplies its manufactured goods to select private entities. In such a scenario also, the goods should get covered under the term defence or military equipment since the supplier of goods is applicant organisation which is a part of the Department of Defence Production, Ministry of Defence. Goods transferred from stock: The factory also uses GTA services for transporting goods that are not manufactured by it but are issued from its stock. Such goods maybe anything that are lying in the stock of the factory. Such goods are transported to the following: i) Transport to sister Ordnance factories: - When such goods are transported to sister Ordnance factories, then the goods should gel covered under the term defence or military equipment since Ordnance factories are part of the Department of Defence Production. Ministry of Defence. ii) Transport to Research institutions: - When such goods are transported to research organisations like. DRDO, ARDE etc., then also the goods should get covered u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such ancillary activity of renting of immovable property since as already explained, such renting of immovable properly is a business as per the said section 2(17) of the CGST Act, 2017 and ITC is attributable to the purposes of business of a registered person as per the said section 17 of the CGST Act. 2017. E) For Question No. 5:- Whether ITC is allowable in respect of food and beverages consumed in industrial canteen? As per section 9 of the CGST Amendment Act, 2018 that is in force from 01 02 2019. an amendment to section 17(5) (b) of the CGST Act, 2017 has been brought about where ITC shall not be available in respect of supply of food and beverages and outdoor catering except where the provision of such goods or services or both is obligatory for an employer to provide to its employees under any law for the time being in force. As per section 46 of the Factories Act 1948. the State Government may make rules requiring that in any specified factory wherein more than two hundred and fifty workers are ordinarily employed, a canteen or canteens shall be provided and maintained by the occupier for the use of the workers. Approximately 3000 persons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are re-filled for use in industrial canteen. ITC in relation to such refilling should be allowed keeping in view the same principle as elaborated above. As per Clause 6 of Schedule II to the CGST Act, 2017, supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration shall be treated as a supply of services. Thus, such supply of food and beverages by the factory to factory employees inside the industrial canteen falls within the category of services as per the aforementioned clause 6. As per Sr. No. 6 of the exemption list on supply of services as per notification no. 12/2017-Central Tax (Rate), supply of services by the Central Government to non-business entities attract NIL Rate of tax Thus, since such supply of food and beverages is done to factory employees that are non-business entities, the charges recovered by the factory from such employees for such supply attracts NIL rate of tax since OFCh is Central Government as exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncern of Ordnance Factory Chanda, that, on similar grounds such exemption should be applicable to Ordnance Factory Chanda too as the nature of working of both organisations is similar. 3) Question No. 3 mentioned above: Similar question, which was raised by General Manager Ordnance Factory Bhandara vide its Application for Advance Ruling to the Maharashtra Authority for Advance Ruling did. 24/09/2018, was answered in the affirmative by the Maharashtra Authority for Advance Ruling with the following observation: Services provided by a goods transport agency, by way of transport in a goods carriage of defence or military equipments are exempt from levy of GST. We find that the applicant is manufacturing and transporting goods like propellant explosives that are used in the manufacture of ammunition and therefore the said exemption is available to them. Since Ordnance Factory Bhandara is a sister concern of Ordnance Factory Chanda, thus, on similar grounds such exemption should be applicable to Ordnance Factory Chanda too as the nature of working of both organisations is similar. 4) Question No. 5 mentioned above Applicant wishes to specific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esent case the applicant working under the Formation of defence Ministry. Government of India, and hence the applicant organization is not required to raise e-way bill at the time of supply of goods. Question No.3:- Whether the exemption payment of GST on transport of military or defence equipment, through a goods transport agency applicable to goods transported by their organization? As per clause (h), of Sr. No. Sr.21 (heading 9965 or 9967 of Notification No. 12/2017-Central Tax (Rae) dated 28th June 2017, services provided by a goods transport agency, by way of transportation in a goods carriage of defence or Military equipment is NIL. Hence the applicant is entitled for exemption from payment of GST on transport of military or defence equipment through a goods transport agency transported by their organization. Question No. 5 Whether Input tax Credit is allowed in respect of Food and beverages consumed in industrial canteen? As per amended provisions of Section 17(5) (b) in view of CGST Amendment Act. 2018 notified with effect from 01.02.2019, exception A is provided thereto (A) the Government notifies the services which are obligat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loyees under any law for the time being in force; Applicant may be covered under provisions of the Factories Act. 1948 mentioned above. But it is not submitted whether applicant recovers some amount from employees towards foods provided in the canteen i.e. if there is an outward supply in the hands of the applicant, and if the Applicant is recovering/charging the amount in respect of food services supplied to the employees then. Entry No. 7(i) (read with Explanation l thereto) of Notification No. 11/2017-Central Tax (Rate) dated the 28.06.2017. as amended from lime to lime, will come into play and the said Notification being a rate notification and not an exemption notification, is not optional to the dealer Hence Input Tax Credit in respect of Food and beverages consumed in industrial canteen is not available to the Applicant in such situation. Question No. 7:- Whether ITC is allowable in respect of medicines purchased in factory hospital and other inputs and input services used in factory hospital? The hospital/dispensary maintained by the applicant for its employees and their dependents come within the definition of Clinical Establishment and such supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tories that use such goods for their production and manufacturing process. Applicant also supplies a small part of its manufactured goods to state police. Defence Public Sector companies like Bharat Dynamics Ltd., units under the Ministry of Home Affairs and defence laboratories like Defence Research Development Laboratory. 5.3 We further find that, when the output is transferred to sister Ordnance factories units of armed Forces as per order, the consideration for transfer is fixed by OFB and is booked in the financial accounts of OFCh organization and the adjustment is done through book transfer. Money consideration is involved only for a small portion of the produce, where the goods are sold directly to units under Ministry of Home affairs, paramilitary forces like BSF. units of state police. defence PSU s and private entities. 5.4 It is also evident that some part of the factory estate has been let out for commercial purposes like daily needs shops and banks. Applicant collects rent from such letting out the immovable property. 5.5 In our opinion the Applicant is fulfilling all the conditions stipulated for being Central Government , as provided under clause (8) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fence equipments through a goods transport agency applicable to goods transported by our organization? 5.10.2 We find that applicant is supplying the subject goods i.e. military or defence equipment through a goods transport agency to the different units of Government. We find that as per clause (h). Heading 9965 or 9967. of Sr. No. 21 of Notification No. 12/2017- Central Tax (Rate) dated 28.6.2017. Services provided by a goods transport agency, by way of transport in a goods carriage, of defence or military equipments are exempt from the levy of GST. In the subject case, we find that the applicant is manufacturing and transporting goods like propellant explosives that are used in the manufacture of ammunition. The aforesaid goods manufactured by the applicant are rightly covered under Entry Sr. No. 21. Heading 9965 or 9967. clause (h) of the Notification No. 12/2017-C.T.- (Rate) dated 28.6.2017 and therefore the said exemption is available to applicant s transaction in respect of transport of military or defence equipments. 5.11 Sections 16 to 21 of the CGST Act deals with conditions for availment, use and recovery of such ITC by businesses. As per the section 16 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upplies renting of immovable property services. Therefore the provisions of Notification No. 3/2018 Central fax (Rate) dated 25.1.2018 u/s 9(3) of CGST ACT 2017, which is applicable in the instant case, is reproduced as under : GSR (E).- In exercise of the powers conferred by sub-section (3) of section 9 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on the recommendations of the Council, hereby makes the following further amendments in the notification of the Government of India, in the Ministry of Finance (Department of Revenue), No. 13/2017-Central Tax (Rate), dated the 28th June. 2017, published in the Gazette of India, Extraordinary. Part II. Section 3. Sub-section (i), vide number G.S.R. 692(E), data the 28th June, 2017, namely:- In the said notification,- (i) in the Table, after serial number 5 and the entries relating thereto, the following serial number and the entries relating thereto shall he inserted, namely - (1) (2) (3) (4) 5A Services supplied by the Central Government, State Government, Union ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure of non-business entities, the charges recovered by the factory from such employees for such supply attracts NIL rate of tax as Ordnance factory Chanda is Central Government as explained above. 5.13.3 The applicant contends that the section 9 of the CGST Act was amended and as per the Amendment Act. 2018 that is in force from 01/02/2019, an amendment in section 17(5) (b) of the CGST Act, 2017 has been brought about where input Tax credit shall not be available in respect of supply of food and beverages except where the provision of such goods or services or both is obligatory for an employer to provide to its employees under any law for the time being in force. In the present case, applicant submitted that approximately 3000 persons have been employed by the applicant and thus the aforementioned provision relating to maintenance of canteen is obligatory for OFCh to provide canteen to its employees under the factories Act. 1948. Hence Applicant contended that ITC would be available to the applicant, due to provision to Section 17(5) (b) of GST Act. from 01.02.2019 onwards only. 5.13.4 We observe that, the Applicant s activities of supply of food and beverages at the ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... industrial canteen and ITC on LPG cylinders refilled for factory canteen of The Applicant will not be available in terms of section 17(2) of the CGST Act, 2017. Similarly the newly amended provision of section 17 (5) (b) of CGST ACT are also not applicable to the transactions of applicant because in the subject case the applicant s outward supply is exempted from taxes and is therefore not taxable. Hence applicant is not eligible for ITC on the inputs and input services (used for exempt outward supply) in industrial canteen i.e. on hired man power services and refilled LPG cylinder. 5.15.1 Question No 7: Whether Input Tax Credit is allowable in respect of medicines purchased in factory hospital and other inputs and input services used in factory hospital? 5.15.2 The Applicant submitted that it is mandatory for the Ordnance Factory Chanda to provide the medical facility to the employees and their dependents free of cost as per the Ordinance Factory Medical Regulations (OFMR) dated 30.01.2009 and accordingly, a hospital is run by the applicant where medicines and other facilities are provided to employees of the factory without any consideration. According to the applicant, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons as discussed in the body of the order, the questions are answered thus Question 1. Is audit by a Chartered Accountant or Cost Accountant under section 35(5) of the CGST Act. 2017 applicable to our organization for- a) The F.Y 2017-18? b) The F.Y 2018-19 succeeding financial years Answer:- Question is withdrawn by the applicant. Question 2. Whether the exemption to a defence formation for preparation and generation of E-way bills is applicable to Ordnance factories other Central Government Public Sector Undertakings (PSU s) that function under the Ministry of Defence. Government of India? Answer:- Answer is in affirmative. Question 3. Whether exemption on payment of GST on transport of military or defence equipment s through a goods transport agency applicable to goods transported by our organization? Answer:- Answer is in affirmative. Question 4. Whether availing of eligible Input Tax Credit on inputs input services relating to the main business activity of manufacturing is allowed against GST liability on renting of immovable property (which is an ancillary business activity)? Answer:- Answer is in negative. Question ..... X X X X Extracts X X X X X X X X Extracts X X X X
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