TMI Blog2022 (4) TMI 1335X X X X Extracts X X X X X X X X Extracts X X X X ..... endor, as a part of its HR policy and this facility is as per employment arrangement with its employees. It cannot be accorded that these activities provided by M/s Encure to its employees to be an activities made in the course or furtherance of business to deem it a Supply by M/s. Emcure to its employees. Input Tax Credit - HELD THAT:- Section 17(5)(b)(i) sub-clause ending with a colon and followed by a provisio which ends with a semi colon is to be read as independent sub-clause, independent of sub clause Section 17(5)(b)(iii) and its proviso [of subclause iii]. Thereby, the provisio to section 17(5)(b)(iii) is not connected to the sub-clause of Section 17(5)(b)(i) and cannot be read into it. ITC on GST paid on canteen facility is blocked credit under Section 17 (5)(b)(i) CGST Act and inadmissible to M/s Emcure - ITC on motor vehicle for transportation of persons having approved seating capacity of more than 13 persons is not blocked credit vide Section 17(5) CGST Act. Thereby, hiring of bus of approved seating capacity of more than 13 persons do not falls under blocked credit as provided under Section 17 (5)(b)(i) CGST Act. - GUJ/GAAR/R/2022/22 - - - Dated:- 12-4-20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on monthly basis) from the employees towards the self-consumption of food provided in the canteen area. 3. M/s. Emcure submitted that Bus transportation service is provided on free of cost to its employees and they do not make any recoveries. The buses provided by the Bus Contractor for transportation of the employees are Non-Air-conditioned (Non-AC) buses having the seating capacity of more than 13 seats. Both the facilities i.e. canteen and bus transportation facilities are provided to the employees without any profit motive. In fact, the said facilities are provided at subsidized rate / amount and also as a part and parcel of the HR policy. 4. M/s. Emcure submitted that the employee recoveries for providing canteen facility is not covered under the ambit of supply under Clause (a) of Section 7 (1) of the CGST Act. Reference is made to Section 7 (1) of the CGST Act, which defines the term supply as under: 7. (1) For the purposes of this Act, the expression supply includes (a) all forms of supply of goods or 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government or any local authority in which they are engaged as public authorities; 4.3 A bare reading of the above clause (a), (b) and (c) provides that business includes any activity in the nature of trade, commerce, manufacture, etc. and business means any activity in the nature of trade, commerce, manufacture, etc. M/s. Emcure submitted that it is engaged in the business of sales, distribution and promotion of pharmaceutical products only. 4.4 M/s. Emcure submitted that in order to comply, the provision of Section 46 of the Factories Act, 1948, they provide canteen facility to its employees. It is not engaged in the business of providing food in the canteen facility to its employees as business activity. The canteen facility is provided by a third-party service provider for which the third party is raising an invoice to M/s. Emcure and charging applicable GST on the same. Therefore, the canteen services are being provided by the third-party service provider only. M/s. Emcure is merely acting as a conduit to provide the canteen facility. M/s. Emcure submits that providing/ non-providing such canteen facility will not affect its business in any way. Hence, the canteen faci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertain activities/ transactions would still be excluded from the scope of supply . 5.2 M/s. Emcure submits that it is providing these facilities to the employees due to their agreed terms. It recovers the subsidized amount of canteen facility to the employee in terms of the HR Policy. Therefore canteen facility is directly in connection with the employment of the employees. 5.3 M/s. Emcure submits that the Press release issued by the Ministry of Finance dated 10th July 2017, reads as follows: Another issue is the taxation of perquisites. It is pertinent to point out here 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 or supply of services). It follows therefrom that supply by the employer to the employee in terms of contractual agreement entered into between the employer and the employee, will not be subjected to GST. Further, the Input Tax Credit (ITC) Scheme under GST does not allow ITC of membership of a club, health and fitness center [section 17 (5) (b) (ii)]. It follows, therefore, that if such services are provided free of charge to all the employees by the em ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... portation facility is used for transportation of its employees from place of work to home and back. The said facility is provided free of cost to the employees and no amount is recovered for the said transportation facility from its employees. 6.2 M/s. Emcure submits that without prejudice to the above, the bus transportation facility provided by them is excluded from the scope of supply in terms of Clause (a) of Section 7 (2) of the CGST Act. M/s. Emcure submits that its submission made in respect of canteen recovery in Ground-3.2, 3.3 of the application equally applies so far as the bus transportation is concerned and that the bus transportation facility is specifically excluded from the purview of supply in terms of Section 7 (2) (a) read with Schedule-III to the CGST Act. 6.3 M/s. Emcure submitted that it is settled position under GST regime that employee recoveries do not amount to supply . 6.4 M/s. Emcure cited the following case laws/ Rulings : In Re: M/s Tata Motors Ltd., 2020 (9) TMI 352 Authority for Advance Ruling, Maharashtra; In Re: M/s North Shore Technologies Pvt. Ltd., 2021 (3) TMI 707 Authority for Advance Ruling, Uttar Pradesh; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e relevant entry is reproduced below: SI.No. Chapter, Section, Heading, Group or Service Code (Tariff) Description of Services Rate (Percent) Condition 15 Heading 9964 Transport of passengers, with or without accompanied belongings, by (a) air, embarking from or terminating in an airport located in the state of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, or Tripura or at Bagdogra located in West Bengal; (b) non-airconditioned contract carriage other than radio taxi, for transportation of passengers, excluding tourism, conducted tour, charter or hire; or (c) stage carriage other than air-conditioned stage carriage. Nil Nil 6.8 M/s. Emcure submits that passenger transportation services via non-air conditioned contract carriage, other than radio taxi is used for transportation of passenger is exempted from GST. It submits that the buses in the given case also qualify as contract carriage. The term contract carriage is defi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amely:- (a) motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver), except when they are used for making the following taxable supplies, namely:- (A) further supply of such motor vehicles; or (B) transportation of passengers; or (C) imparting training on driving such motor vehicles; (aa) vessels and aircraft except when they are used (i) for making the following taxable supplies, namely:- (A) further supply of such vessels or aircraft; or (B) transportation of passengers; or (C) imparting training on navigating such vessels; or (D) imparting training on flying such aircraft; (ii) for transportation of goods; (ab) services of general insurance, servicing, repair and maintenance in so far as they relate to motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa): Provided that the input tax credit in respect of such services shall be available- (i) where the motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) are used for the purposes specified therein; (ii) where received by a taxabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill the date of the amendment i.e. 01.12.2019. However, with effect from 01.12.2019, Input Tax Credit has been allowed on leasing, renting or hiring of motor vehicles, for transportation of persons, having approved seating capacity of more than thirteen persons (including the driver). 8.1 M/s. Emcure has submitted that it is using motor vehicles having approved seating capacity of more than thirteen persons (including the driver), hence in terms of the legal provisions as above it shall be eligible for Input Tax Credit for the bus services. 9. Question on which Advance Ruling sought: 1. Whether the recoveries made by the Applicant from the employees for providing canteen facility to its employees are taxable under the GST laws? 2. Whether the free of cost bus transport facilities provided by the Applicant to its employees is taxable under the GST laws? 3. Without prejudice, even if GST is applicable in respect of employee recovery towards bus transportation facility, whether the Applicant would be exempted under the Sl. No. 15 of Notification No. 12/2017 Central Tax (Rate) dated 28 June 2017? 4. Whether input tax credit is admissible to the Applicant for the G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force.] In light of the above, the issue raised by the applicant should be viewed in light of the various ruling, facts and circumstances submitted by the applicant and may be decided on merits. FINDINGS : 12. We find M/s. Emcure has arranged a canteen for its employees, which is run by a Canteen Service Provider. As per their arrangement, part of the Canteen charges is borne by M/s. Emcure whereas the remaining part is borne by its employees. The said employees portion canteen charges is collected by M/s. Emcure and paid to the Canteen Service Provider. M/s. Emcure submitted that it does not retain with itself any profit margin in this activity of collecting employees portion of canteen charges. Further, We find that M/s. Emcure has arranged free of cost transportation facility to its employees in Non-AC buses, which is provided by third party vendor, as a part of its HR policy and this facility is as per employment arrangement with its employees. We are not inclined to accord these activiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13.4 Thus, we hold that Section 17(5)(b)(i) sub-clause ending with a colon and followed by a provisio which ends with a semi colon is to be read as independent sub-clause, independent of sub clause Section 17(5)(b)(iii) and its proviso [of subclause iii]. Thereby, the provisio to section 17(5)(b)(iii) is not connected to the sub-clause of Section 17(5)(b)(i) and cannot be read into it. Judicial Discipline 13.5. i. We find our view is in compliance to judicial discipline as laid down by the H ble Supreme Court and H ble High Courts. The relevant extract of H ble Supreme Court s judgment in the case of PIL of Shri Jayant Verma v. Union of India, dated 16-2-2018 related to the expressions separated by semicolon is as follows: Firstly, purely grammatically, a semicolon separates the two expressions showing that they are not inextricably connected. . Entry 5, List III deals with seven completely different subjects, all banded together under Entry 5 and separated by semicolons, making it clear that each subject matter is separate and distinct from what follows each semicolon . ii. The relevant portion of judgment of H ble High Court of Kerala in case of M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e (aa) except when used for the purposes specified therein, life insurance and health insurance: . 14.1 When enquired during Virtual hearing, Shri Santosh Tapade informed that bus hired for transportation of employees has capacity more than thirteen passengers. We note that ITC on motor vehicle for transportation of persons having approved seating capacity of more than 13 persons is not blocked credit vide Section 17(5) CGST Act. Thereby, hiring of bus of approved seating capacity of more than 13 persons do not falls under blocked credit as provided under Section 17 (5)(b)(i) CGST Act. 15. In conspectus of aforementioned Discussion and Findings. We pass the Ruling: RULING 1. GST, at the hands of M/s Emcure, is not leviable on the amount representing the employees portion of canteen charges, which is collected by M/s Emcure and paid to the Canteen service provider 2. GST, at the hands of M/s Emcure, is not leviable on free bus transportation facility provided to its employees. 3. ITC on GST paid on canteen facility is blocked credit under Section 17 (5)(b)(i) CGST Act and inadmissible to M/s Emcure. 4. ITC on GST paid on hiring of Bus, having approv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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