TMI Blog2023 (4) TMI 203X X X X Extracts X X X X X X X X Extracts X X X X ..... e employees is not a supply as it is not in the course or furtherance of business. Further, the applicant is merely collecting a part of the canteen expenses from the employee and this does not tantamount to supply as per Section 7 of the CGST and SGST Act. Further, even if the transaction between the applicant and its employees are analysed, a reference to the GST Policy wing Circular 172/04/2022 dated 6th July 2022, para 2, serial no 5, clarifies that any perquisites provided by the employer to its employee in are In lieu of the services provided by the employee to the employer in relation to the employment and therefore the perquisites provided by the employer to the employee will not be subjected to GST. As provision of canteen facility is a mandate as per Factories Act, 1948, we see that even considering the employee and employer transaction solely, GST is not applicable - the applicant is not liable to pay GST on the recoveries from the employees for the canteen services provided to them. Levy of Service Tax - transportation services by a third-party to the employees of the applicant - HELD THAT:- The service provider is charging Rs 2,277 from the applicant per month per empl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r month is Rs.1,538.25/-. Out of the total canteen expense Rs.578/- - is recovered from each employee per month and the applicant bears the cost of balance INR 960.25 per month per employee. 3.3 The applicant has hired a contractor for providing transportation services to the employees of the company transport services per employee per month. The total amount charged by the bus transport service per employee Rs.2,277/-.Out of the total transportation expense only Rs.350/- is recovered each employee per month and the applicant bears cost of balance of INR 1927/- per employee per month. 4. Questions raised before the authority: The applicant seeks advance ruling on the following:- 1. Whether GST would be applicable on the amount recovered from employees for canteen facility provided to them. 2. Whether GST would be applicable on the amount recovered from employees for transportation facilities provided to them. On Verification of basic information of the applicant, it is observed that the applicant is under State jurisdiction i.e., Achuthapuram Circle, Visakhapatnam Division. Accordingly, the application has been forwarded to the jurisdictional officer and a copy marked to the Centra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, vocation, adventure, wager or any other similar activity whether or not it is for pecuniary benefit. C) The applicant in the present case is engaged in the business of manufacture of apparels and not in the business of providing canteen facility. However, since employees are the vital resources to carry out day to day functioning of the business, the applicant provides the canteen facility as a welfare measure. The canteen services are not connected to apparel manufacturing. D) The applicant further submits that, the services are not falling in the ambit of supply, hence the same shall neither be treated as goods nor services. The amount of partial cost recovered from the employees for the bus facility provided is between employer and employee in due course of employment, hence the same will not be liable to be taxed under GST law. E) The applicant submits various rulings by AAR AAAR In support of his arguments. The above position finds support from the advance ruling of the Maharashtra Authority of Advance Ruling In the ease of M/s Emcure Pharmaceuticals Limited [GST-ARA-119/2019-20/B-03 dated 4 January 2022] wherein the authority has held the following- We also find that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther that the Madhya Pradesh Appellate Authority of Advance Ruling has also taken a similar view in the case of M/s Bharat Oman Refineries Limited [Order No. MP/AAAR/07 /2021 dated 8 November 2021]. The relevant extract is reproduced below for reference: ...However, at point no.3 we have held that canteen services would not be leviable to GST at the hands of the employer because of our findings that the employer was merely a facilitator between the canteen service provider and the employee and that the employer was mandated to run a canteen under the Factories Act. 5.2 In the present case, the Applicant submits that canteen service facility provided to its employees should not be considered as an activity made in the course or furtherance of business to deem it a Supply. Therefore, the above advance rulings are squarely applicable to our instant case. The Applicant is not a provider of canteen facility but a receiver of such services and no profit element in the recovery of charges from employees a) The Applicant has arranged a canteen for its employees which is run by a third-party canteen service provider. As per the arrangement, part of the canteen charges is borne by the employ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licant submitted that it does not retain with itself any profit margin in this activity of collecting employees portion of canteen charges. This activity carried out by applicant is without consideration Thus, we pass the Ruling: 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 Further, the Gujarat Advance Ruling Authority in case of M/s Tata Motors Limited (GUJ/GAAR/R/39/2021 dated 30 July 2021] has taken a similar stand we have carefully considered all the submissions made by the applicant. We find that the applicant has arranged a canteen for its employees, which is run by a third party Canteen Service Provider. As per their arrangement, part of the Canteen charges is borne by the applicant whereas the remaining part is borne by its employees. The said employees portion canteen charges is collected by the applicant and paid to the Canteen Service Provider. The applicant submitted that it does not retain with itself any profit margin in this activity of collecting employees portion of canteen charges This activity earned out by appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd should not be taxable as a service, The relevant extract of the judgement has been highlighted below for reference- As a matter of fact, any supply of subsidized food to the workers by the management of a Company, has to be seen as part of the pay package that the workers have negotiated with the employer. Under the Factories Act, 1948 and even under the Industrial Disputes Act, 1947, the expression wages would include within its purview, anything that is supplied at a subsidized rate. Section 2(rr) of the Industrial Disputes Act, 1947 defines wages to mean, all remuneration capable of being expressed in terms of money, which would, if the terms of employment, express or implied, were fulfilled, be payable to a workman in respect of his employment. Interestingly, the definition of the expression wages under Section 2(rr) of the Industrial Disputes Act, 1947 is both an inclusive as well as exhaustive definition. Once the activity undertaken by the petitioner in the form of supply of food to its workers at a subsidized rate is understood to be part of their industrial obligation, it is unthinkable that the same can be construed as service falling within the definition of the expre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t applicable on the amounts recovered by Applicants from their employees in the subject case. 2) Uttar Pradesh Authority of Advance Ruling in case of M/s North Shore Technologies Pvt Ltd. [Order No. 59 dated 29 June 2020] 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 transport services to their employees. We also observe that the applicant, in his application; has informed that apart from subsidized amount collected from the employees, they are also adding up a considerable amount into it and then paying it to the third-party vendor. The applicant is not retaining any amount collected from the employees towards said transportation charges. We further observe that the applicant is in the business of software development and staff augmentation services and not in the business of providing transport service. Rather, this is a facility provided to their employees under the obligation of Law of the Land. Moreover, this activity is not integrally connected to the functioning of their business... From the aforesaid discussions, we observe that arr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave considered the Issues Involved from which Advance Ruling is sought by the applicant and the relevant facts along with arguments made by the applicant and also their submissions made during the time of the personal hearing. We analyse the applicant's submission and pass our ruling accordingly in the following paras. 7.1 The first issue is regarding provision of canteen services to the employees of the applicant by the third-party service provider. It is seen that the service provider, a third-party, is charging Rs 1538.25 per employee per month which is being paid by the applicant. Out of this amount, Rs 578 is being recovered from the employees from their salaries by the applicant. The applicant further submits that this is as per the requirements of Factories Act, 1948 which stipulates for a canteen facility with work force of more than 250. The applicant's work force is well over 11000 and therefore they are mandated to provide the canteen facility as per the Factories Act, 1948. It is clearly seen that the provision of service of canteen is by the third-party to the applicant and not by the applicant to their employees. As per Section 7 of the CGST ACT, supply includ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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