9911796707
TMI Blog2022 (12) TMI 1363X X X X Extracts X X X X X X X X Extracts X X X X ..... .07.2021. 3. The appellant has sought Advance Ruling on the following question "1. Whether input tax credit (ITC) available to applicant on GST charged by service provider on canteen facility provided to employees working in factory? 2. Whether GST is applicable on nominal amount recovered by Applicant from employees for usage of canteen facility? 3. If ITC is available as per question no. (1) above, whether it will be restricted to the extent of cost borne by the Applicant (employer)?" 4. The appellant has submitted that they are maintaining canteen facility for their employees at their factory premises to comply with the mandatory requirement of maintaining the canteen as per the Factories Act, 1948 and as per proviso to Section 17(5)(b) of CGST Act, 2017, ITC of GST paid on 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. The appellant is recovering nominal amount from employees and expenditure incurred towards canteen facility borne by appellant is part and parcel cost to company. 5. The appellant submitted that in press release dated 10.07.2017, it was cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) (b)(i) of CGST Act and inadmissible to applicant. 2. Whether GST is applicable on nominal amount recovered by Applicants from employees for usage of canteen facility? Ans: GST, at the hands on the applicant, is not leviable on the amount representing the employees portion of canteen charges, which is collected by the applicant and paid to the Canteen service provider" 7. Aggrieved by the aforesaid advance ruling in respect to question no. 1 and question no. 3 (in view of answer to question 1, not answered in specific), the appellant has filed the present appeal. 7.1 The appellant in the ground of appeal has submitted that the GAAR erred in holding that due to semicolon after the proviso to Section 17(5)(b)(i), the proviso to Section 17(5)(b)(iii) is not connected to the sub-clause 17(5)(b)(i) and cannot be read into it as if such interpretation of GAAR is accepted then it will make the proviso to Section 17(5)(b)(iii) redundant for aspects which has been incorporated under 17(5)(b)(i). Section 17(5)(b)(iii) restricts ITC on "travel benefits extended to employees on vacation such as leave or home travel concession" and if proviso below Section 17(5)(b)(iii) is interpreted to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the following: a..... ...... e. Goods or services which are obligatory for an employer to provide to its employees, under any law for the time being in force. 7.4 The appellant submitted that the rationale prescribed in Agenda of 28th GST Council Meeting and Press Note issued on Council's recommendations clearly shows that it was the intent of the legislature to widen the scope of ITC and to make ITC available on the supply of goods and services which are obligatory for an employer to provide to its employees, under any law for the time being in force. In accordance with above recommendations, the CGST Act was amended to widen the scope of ITC and to allow the claim of ITC on the abovementioned goods or services. 7.5 The appellant submitted that they are a manufacturing unit and employing more than 250 workers and in accordance with Section 46 of Factories Act, 1948, it is obligatory on them to provide canteen facilities within the factory premises and failure to comply with the provisions of Section 46 attracts prosecution and penalty under Section 92 of Factories Act, 1948. In view of statutory requirement to provide canteen facility, payment made to the canteen s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harged by the service provider on the canteen facility provided to its employees working in their factory. He also submitted that they will not take input tax credit to the extent applicable on the amount of canteen charges recovered from their employees and will surrender the credit to that extent. The appellant further made additional submission vide their dated 12.09.2022 wherein they reiterated submissions made during the course of personal hearing. Further submitted that they have been discharging GST on the canteen charges recovered from contract employees. They prayed that in view of the above legal provisions and clarification issued by the CBIC, the ITC on GST charged by the service provider on canteen facility provided to employees working the factory be held admissible to the extent of cost suffered by the appellant. 8.1 The appellant further vide their email dated 28.09.2022 submitted copy of consolidated annual return for the year ended 31.12.2021 filed with the Deputy Labour Commissioner, Ahmedabad. In the said return they had declared total 2299 direct workers employed at their factory. Further they had also declared 3 canteen facilities provided at their factory p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y for an employer to provide the same to its employees under any law for the time being in force. 12. Above Section 17(5)(b) was amended on 01.02.2019. The same was resultant of the 28th meeting of GST Council held on 21St July, 2018. The Press Note issued on the recommendations made during above meeting stated that scope of input tax credit is being widened and it would now be available in respect of goods or services which are obligatory for an employer to provide to its employees under any law for the time being in force. The appellant submitted that they are a manufacturing unit and employing more than 250 workers and in accordance with Section 46 of Factories Act, 1948, it is obligatory on them to provide canteen facilities within the factory premises. The appellant submitted copy of consolidated annual return for the year ended 31' December 2021 filed with the office of the Deputy Labour Commissioner, Ahmedabad wherein they had declared total of 2299 direct workers employed in their factory and total of 3 canteen facilities provided to their employees. They have also submitted a declaration stating that they have canteens at their plant for their employees in terms of pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... substitution, the proviso after sub- clause (iii) of clause (b) of sub-section (5) of section 17 of the CGST Act provides as under: "Provided that the input tax credit 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." 2. The said amendment in sub-section (5) of section 17 of the CGST Act was made based on the recommendations of GST Council in its 28th meeting. The intent of the said amendment in sub- section (5) of section 17, as recommended by the GST Council in its 28th meeting, was made known to the trade and industry through the Press Note on Recommendations made during the 28th meeting of the GST Council, dated 21.07.2018. It had been clarified that "scope of input tax credit is being widened, and it would now be made available in respect of Goods or services which are obligatory for an employer to provide to its employees, under any law for the time being in force." 3. Accordingly, it is clarified that the proviso after sub-clause (iii) of clause (b) of sub-section (5) of section 17 of the CGST Act is applicable to the whole of clause (b) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervice provider will be available only to the extent of cost borne by the appellant, for providing the canteen services only to its direct employees.
17. In view of the foregoing, we modify the Advance Ruling No. GUJ/GAAR/R/39/2021 dated 30.07.2021 of the Gujarat Authority for Advance Ruling, to the extent it has been in appeal before this authority, in case of M/s Tata Motors Ltd and hold that -
(i) Input Tax Credit (ITC) will be available to the appellant on GST charged by the service provider in respect of canteen facility provided to its direct employees working in their factory, in view of the provisions of Section 17 (5)(b) as amended effective from 01.02.2019 and clarification issued by CBIC vide Circular No. 172/04/2022-GST dated 06.07.2022, read with provisions of Section 46 of the Factories Act, 1948, and read with provisions of the Gujarat Factory Rules, 1963 and clause (ii) below;
(ii) ITC on the above is restricted to the extent of the cost borne by appellant for providing canteen services to its direct employees, but disallowing proportionate credit to the extent embedded in the cost of food recovered from such employees. X X X X Extracts X X X X X X X X Extracts X X X X
|
