TMI Blog2022 (4) TMI 1339X X X X Extracts X X X X X X X X Extracts X X X X ..... provider. - GUJ/GAAR/R/2022/19 - - - Dated:- 12-4-2022 - ATUL MEHTA AND ARUN RICHARD, MEMBER Present for the applicant : Shri Mitesh Jain, CA Brief facts: M/s. Cadila Healthcare Limited., hereinafter referred to as M/s Cadila for the sake of brevity, is engaged in manufacture, supply and distribution of various pharmaceutical products. M/s. Cadila is having 7200 (approx.) employees in their factory corporate offices and is registered under the provisions of Section 46 of the Factories Act, 1948. As per the said provisions M/s. Cadila submits that it is mandated to provide canteen facility to its employees at the factory and provides canteen facility to its employees at the factory by appointing a Canteen Service Provider to comply with the statutory requirement laid down under the Factories Act. The summary of the type of employees and the nature of recovery of subsidized value is tabulated as follows: Meals : Sl.No. Types of employee Mode of availing facility Basis of recovery Mode of recovery Book treatment ITC availme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the taxable person. 1.2. Basis the above, it is clear that to levy tax on any activity, the activity is required to qualify as a 'Supply in the first place. The provision of Section 7 of the said Act, which states that: (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 in the course or furtherance of business; (b) import of services for a consideration whether or not in the course or furtherance of business; (c) the activities specified in Schedule I, made or agreed to be made without a consideration (1A) Where certain activities or transactions constitute a supply in accordance with the provisions of sub-section (1), they shall be treated either as supply of goods or supply of services as referred to in Schedule II. 1.3. Thus, the term Supply includes all forms of supply (goods and/or services) and includes agreeing to supply when the supply is for a consideration and is in the course or furtherance of business. The word supply is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eur der Omzetbelasting Leeuwarden in case C-16/93 (Judgement of the Court, Sixth Chamber) wherein it was held that the Supply of Service effected for consideration within the meaning of that provision does not include an activity consisting in playing music on the public highway for which no remuneration is stipulated, even if musician solicits money and receives sum whose amount is however neither quantified nor quantifiable. The principle espoused here was that a supply of services is effected for consideration only when the provider of the service and the recipient enter into a legal relationship wherein the provider carries out a service and receives remuneration in return for the said service which was absent in the public performance on the highway owing to lack of intention. In the present case also; there was no intention of the M/s. Cadila to contract with its employees with respect to the service of food and beverages in its canteen premises and hence, this basic requirement of qualifying as a supply itself is not satisfied. 1.9. M/s. Cadila has submitted that in light of the above judgement, that there must be a legal intention to enter in a contractual relati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansaction in money between the M/s. Cadila and its employees. 1.14. M/s. Cadila has placed reliance on the judgement of Bombay High Court in the case of Bai Mamubai Trust, Vithaldas Laxmidas Bhatia, Smt. Indu Vithaldas Bhatia vs. Suchitra [Commercial Suit (l) No. 236 of 2017], has held that for GST to be payable on any payment, there must be the necessary quality of reciprocity to make it a 'supply'. 1.15. M/s. Cadila submit that it deducts a pre-determined amount from the employee s salary as a recovery of expenses under employment relationship without any commercial objective. The same is also shown as a deduction in the salary slip provided to the employees. Based on the above interpretation, it can be said that there is no reciprocity of any activity or transaction i.e. when is no express or implied reciprocity i.e. quid-pro-quo, between the Applicant and the employees. Thus, in the absence of an identifiable supply, the activity would not constitute consideration for any supply. 1.16. M/s. Cadila has submitted that Section 7 of the CGST Act, (Supra) states that an activity could be considered as a supply only if it is in the course or furtherance of bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erson s regular calling or business; one s occupation or profession. f. Adventure - A commercial undertaking that has an element of risk; a venture. Cf. Joint venture; A Voyage involving financial and insurable risk, as to a shipment of goods. g. Wager - Money or other consideration risked on an uncertain event; a bet or gamble. A promise to pay money or other consideration on the occurrence of an uncertain event. See wagering contract under Contract. 1.20. It cites Cinemax India Limited Vs Union of India (Special Civil Appeal Nos. 8032, 9661, 11032, 11111, 12933 of 2010 and 707 of 2011 decided on 23.08.2011) wherein the term furtherance of business has been pointed out as: The meaning of 'furtherance', as per Black's Law Dictionary, 6th Edition, 11th reprint, 1997, is act of furthering, help forward, promotion, advancement or progress. Furtherance of business will, thus mean, act of furthering business, helping forward business, promotion of business, advancement of business or progress of business. 1.21. In the Australian Concise Oxford Dictionary (1997) defines the phrase 'in the course of' as 'during' and the word & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oyee, 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 centre [section 17 (5) (b) (ii)]. It follows, therefore, that if such services are provided free of charge to all the employees by the employer then the same will not be subjected to GST, provided appropriate GST was paid when procured by the employer. The same would hold true for free housing to the employees, when the same is provided in terms of the contract between the employer and employee and is part and parcel of the cost-to-company (C2C). 1.27. M/s. Cadila submitted that considering the press release dated 10th July 2017, common facilities provided commonly to employees would not be subject to GST as they cannot be considered as gifts: 1. Telephone / mobile services 2. Internet services 3. Education reimbursement for employees children 4. Transport facilities 5. Membership of gym, health club etc. 6. Subscription to journals 7. Canteen facility etc. 1.28. Further, it is submitted that in the present facts there is no independent contract, which exists between the M/s. Cadila and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was paying the premium towards mediclaim taken for their employees and the parents of such employees against such payments made they were recovering 50% from their employees. The AAR Maharashtra held that there is no way that the 50% amount recovered can be treated as amounts received for services rendered, since this entire amount is paid to the insurance company which is providing mediclaim facilities to the employees and their parents. Such recovery of 50% premium amounts by the applicant from their employees cannot be supply of services under the GST laws. (iv) In case of In Re: M/s Jotun India Pvt Ltd [2019 (10) TMI 482] by the Authority for Advance Ruling, Maharashtra, wherein it was held that the recovery of 50% of Parental Health Insurance Premium from employees does not amount to supply of service under Section 7 CGST Act, as the Assessee was not in the business of providing insurance service. 1.32. M/s. Cadila submitted that if such services are covered by the employment policy, then they are not to be considered as supply. They refer to Section 7(2) of the CGST Act which overrides section 7(1) of CGST, thus makes it amply clear that any transactions which are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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