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TMI Blog2022 (4) TMI 1339X X X X Extracts X X X X X X X X Extracts X X X X ..... s of recovery Mode of recovery Book treatment ITC availment in inward supply Payment of GST on outward supply 1. Full-time employees ID card or biometric On the basis of consumption Subsidized value deducted from salary on actual consumption and disclosed under the deduction side of the salary pay slip Deduction is credited to the canteen expense account while the full amount of the invoice issued by the Canteen Service Provider is booked as expense in the Applicant's Profit & Loss account ITC of the GST paid on the Canteen Service Provider's invoice, is not availed GST is paid on the basis of the number of punches in the system during the month on open market value (i.e. the value charged by the canteen service provider) 2. The above deduction is credited to the expense account in which canteen expense is booked while the full amount of the invoice issued by the Canteen Service Provider is booked as expense in the M/s. Cadila Profit & Loss account without taking the benefit of ITC of the GST paid on the Canteen Service Provider's invoice. 3. M/s. Cadila and Canteen Service Provider have entered into an agreement that M/s. Cadila shall pay full amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... role to determine the GST implications on provision of such a facility: - There shall be a legal intention of both the parties to the contract to supply and receive the goods or services or both. The absence of such intention would not amount to Supply within a meaning of CGST Act; - It should involve quid pro quo - viz., the supply transaction requires something in return, which the person supplying will obtain, which may be in monetary terms/ in any other form except in cases of deeming provision as specified in Schedule I; and - The Supply of goods or services or both shall be affected by a person in the course or furtherance of business. 1.5. M/s. Cadila submitted that supply is from the Canteen Service Provider to the employees and not from the Canteen Service Provider to M/s. Cadila as the food gets consumed only by the employees. Though, the supplier is the Canteen Service Provider and invoice is raised on M/s. Cadila, but the ultimate recipient of such canteen facility is the employee. M/s. Cadila merely allows the Canteen Service Provider to use his demarcated area i.e. canteen area for serving food to the employees and makes payment to the Canteen Service Provider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to provide a service, the same shall not be treated as Supply within the meaning of Section 7 of the CGST Act. 1.10. M/s. Cadila submits that there is no 'Supply' by it in the form of provision of canteen facility to its employees in view of the above. 1.11. M/s. Cadila submits that with respect to the definition of supply, as mentioned in Section 7 of the CGST Act, (Supra) it is pertinent to evaluate another element of supply which states that an activity could be considered as a supply only if it is made or agreed to be made for a consideration. Thus, it becomes very critical to analyze the term consideration against the deduction of amount from its employees' salary. 1.12. The term consideration defined in Section 2(31) of the CGST Act, 2017 is as follows: 'consideration' in relation to the supply of goods or services or both includes,- a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government; b) the monetary value of any act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imilar activity, whether or not it is for a pecuniary benefit: (b) any activity or transaction in connection with or incidents or ancillary to sub-clause (a); (c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction; (d) supply or acquisition of goods including capital goods and services in connection with commencement or closure of business; (e) provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members; (f) admission, for a consideration, of persons to any premises; (g) services supplied by a person as the holder of an office which has been accepted by him in the course or furtherance of his trade, profession or vocation; (h) [activities of a race club including by way of totalisator or a license to book maker or activities of a licensed book maker in such club; and] (i) any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities." 1.18. M/s. Cadila states that considering the natur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of maintenance of a hostel which involved supply and sale of food was an integral part of the objects of the Institute; and (b) the running of the said hostel could not be treated as the principal activity of the Institute. Consequently, the Institute was held to not be doing business. 1.23. M/s. Cadila has submitted that in the light of the above canteen services cannot be treated as ancillary to their business activity. Firstly, canteen services are provided only to the employees of the Company as per the internal employment policy applicable to the employees. Hence, if canteen can be termed as expenses for use in the course of business than a business activity itself, then the same cannot be termed as 'supply' to be taxed under GST. 1.24. M/s. Cadila submits that the Canteen Service Provider is required to adhere to all the applicable provisions of such Act since they are engaged in the provision of manufacturing, selling and handling food and not the Applicant. Therefore, the activity of setting up the canteen facility and subsequent deduction of nominal value would not tantamount to Supply under Section 7 of the CGST Act. 1.25. Notwithstanding anything mentioned above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d with Section 7(2) of the CGST Act specifies that any services provided by an employee to the employer in the course of or in relation to his employment shall be neither a supply of goods nor supply of services. In short, the consideration paid by the employer to the employee as part of the employment policy shall be out of the scope of levy of GST. 1.30. Further, it is submitted by M/s. Cadila that as the facility of canteen is provided due to the existing 'Employer-Employee' relationship, an employee is not allowed to use the canteen facility once the 'Employer-Employee' relationship ceases i.e. when the employment is terminated. This makes it evident that 'Employer-Employee' relationship is a pre- requisite to avail the canteen facility. 1.31. M/s. Cadila has placed reliance on the following Ruling issued by various Hon'ble Authority : (i) [GST-ARA -23/2019-20/B-46 dated 25 August 2020], wherein it was held that since the Applicant (i.e. Tata Motors) had not been supplying any services to its employees, in view of the provisions of Schedule-III; GST was not applicable on the nominal amounts recovered by the said Applicant from its employees for providing transportation faci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - (a) activities or transactions specified in Schedule III; or (b) such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council, shall be treated neither as a supply of goods nor a supply of services". 1.33 M/s. Cadila submitted that the canteen facility provided to its employees upon which they are deducting the nominal value, cannot be regarded as supply under the GST law. Therefore, GST cannot be levied on such activity. Question on which Advance Ruling sought: 5. Whether the subsidized deduction made by the Applicant from the employees who are availing food in the factory/corporate office would be considered as a supply by the Applicant under the provisions of Section 7 of Central Goods and Service Tax Act, 2017 and Gujarat Goods and Service Tax Act, 2017. a. In case answer to above is yes, whether GST is applicable on the amount deducted from the salaries of its employees? b. In case answer to above is no; GST is applicable on which portion i.e. amount paid by the Applicant to the Canteen Servi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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