TMI Blog2022 (10) TMI 305X X X X Extracts X X X X X X X X Extracts X X X X ..... so not the output service of the applicant since they are not in the business of providing transport service. Rather, this bus transportation facility is provided, to the employees by the third party vendors and not by the applicant. Therefore in the subject case, the applicant is not provider of bus transportation facility to its employees, in fact the applicant is a receiver of such services. The applicant is providing transport and canteen facility to its permanent employees (on payroll) as per contractual agreement between employer employee relationships - The Provision of Services of transports and canteen facility to its employees is as per the contractual agreement between the employee and the employer in relation to the employment. As cited in the referred provisions of scheduled III and the clarification issued vide Circular No. 172/04/2022-GST dated 06-07-22, the provision of the services of transportation and canteen facility cannot be considered as supply of goods or services and hence cannot be subjected to GST. - GUJ/GAAR/R/2022/41 - - - Dated:- 28-9-2022 - MILIND KAVATKAR AND AMIT KUMAR MISHRA, MEMBER Present for the applicant: Shri Shushanta Dutta, DGM T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ering of the services. All payments made to the Service Provider shall be inclusive of all applicable taxes. SRF shall pay the undisputed Service Fees within 60 days from date of receipt of invoice from the Service Provider. All direct or indirect taxes, duties, levies, royalties, etc. with regard to this Agreement shall be paid by Service Provider. In the vent of any dispute, the same shall be communicated to the Service Provider within seven (7) working days from the date of receipt of invoice by SRF. SRF will ensure the payment of bills to be made/ reimbursed in the same month; in case of any delay in payment, the Service provider is not authorized to charge any amount in form of interest, fee or supplementary charges. ............................. Schedule 1 Scope of Work Service Provider's Obligation Note: - These rates are fixed for 2 years and 3rd year rates to be revised as per Food Article inflation index and manpower MWDA rise mutually. Go Live Date: 01 Sept 2020 Contract term: 01 Sept 2020 to 31st Aug 2023 (3 years) Scope of Services 1. The Service Provider shall provide service at site address and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on existing rate 12.60 Biscuits/ Cold Drink/ Mineral water/ Namkeen/ wafers On MRP On MRP On MRP Meals (Lunch/ Dinner) 1. Roti/Puri/Paratha 125 gm 2. Rice/ Khichdi/ Pulao 125 gm 3. Kathol 100 gm 4. Seasonal Vegetable 100 gm 5. Dal/Kadhi 100 gm 6. Salad/ Pickle 15/5 gm 7. Curd/ Buttermil 50/150 ml 8. Papad/ Fry urns (small) 1 nos. 9. Sweet (once a week only) 10. 50/100gm 1 45.00 5% increase on existing rate 47.25 Monthly fixed Cost-Paid (Holidays, Pickle, Saunf etc), Food transport vehicle etc (Detailed breakup as per below) a) Transportation Charges- 24000.00 b) Cleaning Charges- 12000.00 c) Pickle Mukvas- actual d) NH/W.OFF/FH OT Actual ( As per wage register) 1.88 lac to 2.44 lac No change- as per existing practice in actual 1 No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice provider shall raise an invoice upon the Applicant. In exchange, the Applicant Company recovers a subsidized amount from its employees as per Canteen Policy No. FCB SCB (D)/JET/PP/14.2 dated 01 April 2016, relevant extract of which is re-produced as under for ready reference:- POLICY Providing Canteen facility to employees at FCB SCB Dahej PURPOSE To provide wholesome meal, tea and snacks to employees on duty ELIGIBILITY All employees at FCB SCB Dahej RULES Tea and Snacks will be served at main canteen and all the snacks' points located at various locations at plant. The current timings are mentioned below. The company provides 70% subsidy on items prepared in the canteen and 30% of the cost will be borne by employee. This recovery will be done from monthly salary based upon actual number of Meals/Snacks consumed by employee. Current rate of subsidy cost is as below Meal Type Recovery Amount in Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ensure that the employees reach the factory premise and back home safely and maintain the schedule of their arrival departure as per shift timings. For this purpose, an internal policy document bearing no. FCB SCB(D)/JET/PP/25.2 dated 01 April 2016 has been issued within the company for all the employees working at FCB SCB (Dahej) wherein it is mentioned under the Rules ' that the transport is available at subsidized rates. Relevant extract of the policy document has been verbatim reproduced as under - POLICY To provide transport facility to the employees of FCB SCB (Dahej) PURPOSE To ensure that employees reach the factory safely and with ease. To maintain the schedule of their arrival and departure as per shift timings ELIGIBILITY All employees working at FCB and SCB at Dahej ENTITLEMENT Travel by company transport RULES Transport is provided to from Dahej and Baruch as per the fixed route The employee must notify the Admin about the pick-up po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is a mandatory requirement as per Section 46 of Factories Act, 1948 which reads as - Section 46 - Canteens (1) 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. (2) Without prejudice to the generality of the foregoing power, such rules may provide for,- (a) the date by which such canteen shall be provided; (b) the standards in respect of construction, accommodation, furniture and other equipment of the canteen; (c) the foodstuffs to be served therein and the charges which may be made therefore; (d) the constitution of a managing committee for the canteen and representation of the workers in the management of the canteen: (dd) the items of expenditure in the running of the canteen which are not to be taken into account in fixing the cost of foodstuffs and which shall be borne by the employer; (e) the delegation to the Chief Inspector, subject to such conditions as may be prescribed, of the power to make rules under clause (c). b. Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rementioned transaction. d. No service rendered in the 'course or furtherance of business' - It is submitted that definition of 'supply' as provided under Section 7 of CGST Act requires any transaction/activity, etc. to be incurred in the 'course or furtherance of business whereas impugned transaction cannot be said to be incurred in the course or furtherance of business of the Applicant as Applicant's business is not that of providing canteen facility or outdoor catering services as discussed in para (b) supra. Applicant merely facilitated the provision of canteen facility in its premises as a part of welfare measure (as HR policy) for its employees. It is important to highlight the definition of 'business' as envisaged under Section 2(17) of the Act and the relevant extract of the same has been verbatim reproduced as under- business includes,- (a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit; (b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a); (c) any activity or transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 34 taxmann.com 74 (AAR -MAHARASHTRA) - 1. 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. Emcure Pharmaceuticals Limited., the applicant, seeking an advance ruling in respect of the following questions. (a) Whether the GST would be payable on recoveries made from the employees towards providing canteen facility at subsidized rates in the factory and office? (b) Whether the GST would be payable on the recoveries made from the employees towards providing bus transportation facility? If yes, whether the Applicant is exempted under Notification No. 12/2017 Central Tax (Rate)? (c) ............................... 2. FACTS AND CONTENTION - AS PER THE APPLICANT: 2.1 M/s Emcure Pharmaceuticals Limited, the Applicant, a pharmaceutical company with registered office at Emcure House, T-184, M.I.D.C. Bhosari, Pune 411026, Maharashtra, engaged in developing, manufacturing and marketing of pharmaceutical products, provides canteen and bus transportation facility to its employees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utput service of the applicant since it is not in the business of providing canteen service. Rather, we find that, this canteen facility is provided to employees by the third party vendors and not by the applicant. Therefore in the subject case, the applicant is not providing any canteen facility to its employees, in fact the applicant is a receiver of such services. 5.3.5 We observe that the GST is discharged on the gross value of bills raised on the applicant by the third party vendors, providing canteen facility. We also observe that the partial amounts recovered by the applicant from its employees in respect of use of such canteen facility are a part of the amount paid to the third party vendors which has already suffered GST. 5.3.6 Since the provision of canteen facility by the applicant to its employees is not a transaction made in the course or furtherance of business, and since in terms of section 7 of the CGST Act, 2017, for a transaction to qualify as supply, it should essentially be made in the course or furtherance of business, we find that the canteen services provided by the applicant to its employees cannot be considered as a supply under the relevant pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mployees. 5.4.6 Further reference is also made to the decision of the Uttar Pradesh Advance Ruling Authority in respect of the advance ruling application filed by M/s North Shore Technologies Private Limited. In the said matter a similar question was raised by the applicant as to whether the subsidized shared transport facility provided to employees in terms of employment contract through third party vendors, would be construed as Supply of service by the company to its employees. The said authority has observed that, the applicant was in the business of software development and staff augmentation services and not in the business of providing transport service. The facility provided to their employees was not integrally connected to the functioning of their business and therefore, providing transport facility to its employees cannot said to be in further of business. 5.4.7 We also refer to a recent ruling passed by this authority in an advance ruling application filed by Integrated Decisions and Systems India (P.) Ltd., In re [GST-ARA-116/2019-20/B-1 13, dated 16-12-2021] wherein the facts in respect of provision of transport facility are similar to the facts in the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that the appellant does not supply any goods or services to its employees against the amount collected from the employees. The appellant collects employees' portion of amount and pays the consolidated total amount, which includes appellant's share of amount also, to the Canteen Service Provider towards the foodstuffs provided to employees by the Canteen Service Provider. The appellant neither keeps any margin in this activity of collecting employees ' portion of amount nor makes any separate supply to the employees. Furthermore, it is not the appellant who is supplying the foodstuff or canteen service to its employees, but it is a third party who is supplying the foodstuff or canteen service to the employees of the appellant. In our view, as the appellant is not carrying out the said activity of collecting employees8 9 portion of amount to be paid to the Canteen Service Provider, for any consideration, such transactions are without involving any 'supply9 from the appellant to its employees and is therefore not leviable to Goods and Services Tax. 8. We observe that the GAAR has ruled that the Goods and Services Tax is applicable on the amount recovered from em ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2021 dated 08 November 2021 (AAAR - MADHYA PRADESH) - 9. DISCUSSION AND FINDINGS ............................ Point No.3 - 1. Whether GST is applicable on recovery of nominal amount for availing the facility of canteen at the Bina refinery? On this question, the Ld AAR has pronounced that facility of canteen services was liable to GST and valuation of canteen facility provided by the applicant to its employees shall be as per Rule 28 and not at the nominal amount recovered by the applicant from its employees. 2. The appellant has a manufacturing setup and maintains/manages industrial canteen for providing food and refreshments to its employees as they cannot leave the premises due to the nature of their work and the refinery is mandated to work round the clock. The appellant is required by law to maintain canteen facilities for its employees under Section 46 of the Factories Act, 1948. For this facility the appellant recovers Rs. 700/- per month from the salary of the employees as a standard deduction, irrespective of the fact whether the employees are availing canteen facility or not. The canteen facility has been outsourced and run by a canteen contractor. As the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... employees' portion of consideration by the appellant. 7. It is evident from the aforesaid nature of transaction that the appellant does not supply any goods or services to its employees against the amount collected from the employees. The appellant collects employees' portion of amount and pays the consolidated total amount, which includes appellant's share of amount also, to the Canteen Service Provider towards the foodstuffs provided to employees by the Canteen Service Provider. The appellant neither keeps any margin in this activity of collecting employees' portion of amount nor makes any separate supply to the employees. Furthermore, it is not the appellant who is supplying the foodstuff or canteen service to its employees, but it is a third party who is supplying the foodstuff or canteen service to the employees of the appellant. In our view, as the appellant is not carrying out the said activity of collecting employees 'portion of amount to be paid to the Canteen Service Provider, for any consideration, such transactions are without involving any 'supply' from the appellant to its employees and is therefore not leviable to Goods and Services Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of business to deem it a supply by Ms Cadila to its employees. We pass the Rulings : RULING GST, at the hand of the M/s Cadila, is not leviable on the amount representing the employees portion of canteen charges, which is collected by M/s Cadila and paid to the canteen service provider. (vii) In re: Cadmach Machinery Pvt. Ltd., cited in 2022 [4] TMI 1337 (AAR - GUJARAT) 6............... Question on which Advance Ruling sought: 2 .......... . Whether recovery of amount from employee on account of third party canteen service provided by assessee, which is obligatory under section 46 of Factories Act, 1948, would come under definition of 'Outward Supply ' and, therefore taxable as 'Supply ' under GST 3 ................... 4.......... ............. Findings: 5. We find that Cadmach has arranged canteen facility for it's employees, which is run by a canteen service provider. As per their arrangement, part of the canteen charges are borne by Cadmach whereas the remaining part is borne by its employees. The said employees portion is collected by Cadmach and paid to the canteen service provider. Cadmach submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cant? iii. If the answer to question 1 is in affirmative, under which service classification, the activity of arranging transport facility for employees, would fall? iv. If the answer to question I is in affirmative, who would be liable to pay the GST and what rate of GST would be applicable on the value of supply determined under question 2 above? Discussion and Finding ...................... 11. The first question before us to decide is to whether the subsidized shared transport facility provided by the applicant to its employees, in terms of employment contract, is a Supply of service by the applicant to its employees. ............................. 15. Here, we observe that while defining the term Supply , emphasis has been made upon the term in the course or furtherance of business .................... Further, the term 'Business' has been defined under section 2(17) of the CGST Act, 2017, as below: ....................... 16. From the details/documents provided by the party, we observe that the applicant is transferring the entire amount collected from their employees, to the third party vendor who is providing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appointment letters wherein the terms and conditions for availing the facility has been specified. 18.1 From the aforesaid discussions, we observe that arranging the transport facility for the employees and recovery from employees towards such transport facility, under the terms of the employment contract, cannot he considered as supply of service in the course of furtherance of business. Providing transport facility to employees is no where connected with the business of the applicant. 19. Accordingly, we are in unison with the applicant that arranging the transport facility for the employees is definitely not an activity which is incidental or ancillary to the activity of software development, nor can it be called an activity done in the course of or in furtherance of development of software as it is not integrally connected to the business in such a way that without this the business will not function. 20.1 Further, coming to the subsequent questions, we observe that the subsequent questions in the application apply only when the answer of first question is in affirmative. As we are of the view that arranging transport facility to its employee is not a supply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... party service provider to Applicant's employees at Applicant's premises. (ii) Provision of bus transportation facility by 3rd party service provider to Applicant's employees; and. 2. If the answer to any of the question above is yes, what is the applicable rate of GST thereupon? Personal Hearing: 11. Personal hearing granted on 08-07-22 and 02-09-22 was attended by Shri Shushanta Dutta and Shri Anandi Prasad and they reiterated the submission. On being specifically asked Shri Shushanta Dutta stated that total numbers of employees on the payroll (permanent employees) are 2500. DISCUSSION AND FINDINGS: 12. We have considered the submissions made by the Applicant in their application for advance ruling as well as the submissions made by authorised signatory, during the personal hearing proceedings on 2-9-22 before this authority. We have also considered the issue involved, on which advance ruling is sought by the applicant, relevant facts the applicant's interpretation of law. 13. At the outset we would like to make it clear that the provisions of CGST Act and GGST Act are in pari materia and have the same provisions in like matter an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m reproduced as under - POLICY To provide transport facility to the employees of FCB SCB (Dahej) PURPOSE To ensure that employees reach the factory safely and with ease. To maintain the schedule of their arrival and departure as per shift timings ELIGIBILITY All employees working at FCB and SCB at Dahej ENTITLEMENT Travel by company transport RULES Transport is provided to from Dahej and Baruch as per the fixed route The employee must notify the Admin about the pick-up point on his joining. Admin to accordingly ensure planning of vehicles. Transport is available at subsidized rates. The current rate of monthly recovery is as under Cadre Amount (Rs.) JE/Technician/Workmen 26/- Officer 260/- This amount is fixed irrespective of number of days employee have ..... X X X X Extracts X X X X X X X X Extracts X X X X
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