TMI Blog2023 (4) TMI 298X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;' under the provisions of section 7 of the CGST Act, 2017. Whether Input Tax Credit of GST charged by the CSP would be eligible for availment by the applicant? - HELD THAT:- Input Tax Credit will be available to the appellant in respect of food and beverages as canteen facility is obligatorily to be provided under the Factories Act, 1948, read with Gujarat Factories Rules, 1963 and Gujarat Shops and Establishment (Regulation of Employment and Condition of Service) Act, 2019 as far as provision of canteen service for full time/direct employees working on permanent basis at the factory/corporate office is concerned. It is further held that the ITC on GST charged by the canteen service provider will be restricted to the extent of cost borne by the appellant only. - MILIND KAVATKAR AND AMIT KUMAR MISHRA, MEMBER Present for the applicant : Mitesh Jain (C.A.), Mihir Patel Brief facts: M/s. Cadila Pharmaceuticals Ltd, Plot No. 1389, Trasad Road, Dholka, Ahmedabad, Gujarat 382 225 [for short-'applicant'] is registered under GST and their GSTIN is 24AAACC6251E1Z5. 2. The applicant is engaged in the business of manufacture, supply and distribution o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and infrastructure facility. 4. Provide vehicle for pick up of food sending empty vessels back to the kitchen. 5. Arrange for pest control on regular basis. 1. Regularly preparing and serving breakfast, lunch and dinner. 2. Fortnightly prepare and fix menu. 3. Maintain food safety, hygiene cleanliness. 4. Selecting appropriate staff for maintaining the kitchen and providing food. 5. Maintain proper record of receipt, issues, consumption, stock, etc. 6. Follow proper procedure, system, parameter. 6. It is the applicant's contention that since it is practically not possible to enter into a contractual agreement with every employee, the CSP has entered into an agreement with the applicant; that the applicant shall be paying full to the CSP in respect of goods served during the prescribed period on behalf of the employees; that a portion of the said amount is recovered from the employees and the remaining part is borne by the applicant; that the amount so borne by the applicant is treated as staff welfare expenses towards subsidized food served to employees. 7. Presently the applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in its canteen premises; that this basic requirement of qualifying as a supply is not satisfied; that there must be a legal intention to enter into a contractual relationship with its recipient which casts roles and responsibility on each of the contractual party to fall within the ambit of supply under GST; that in terms of section 7, ibid, an activity can be considered as supply only if it is made or agreed to be made for a consideration; that consideration is defined u/s 2(31) ibid: that supply must involve enforceable reciprocal obligations; that a receipt of payment without an agreement, cannot be linked to a supply for the purpose of levying GST; similarly deduction in employees salary is only a transaction in money between applicant and its employees; that the activity of provision of canteen facility, does not fall within the ambit of business; that it is termed as an expense and therefore the activity of setting up canteen facility subsequent deduction of nominal value would not tantamount to supply u/s 7 ibid; that there is no independent contract with the employee for setting up canteen facility; that the canteen facility has been set up on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that they would be providing copies of relevant contracts to substantiate their plea. Thereafter, vide their letter dated 28.2.2023, the applicant has provided copy of contract with CSP and copy of the agreement or policy document for cafeteria/canteen service to employees [only one page]. 11. Assistant Commissioner, CGST, Division V, Ahmedabad North, vide their letter dated 6.2.2023, has relying on Sections 7 and 16 of the CGST Act, 2017, stated that the issue raised should be viewed in light of the various ruling facts circumstances submitted by the applicant and has requested that it may be decided on merits. Discussion and findings 12. At the outset, we would like to state that the provisions of both the CGST Act and the GGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, reference to the CGST Act would also mean a reference to the same provisions under the GGST Act. 13. We have considered the submissions made by the Applicant in their application for advance ruling as well as the submissions made during the course of personal hearing. We have also considered the issue invol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that are to be treated as - (a) a supply of goods and not as a supply of services; or (b) a supply of services and not as a supply of goods. Section 17. Apportionment of credit and blocked credits.- [relevant extracts] 5) Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (I) of section 18, input tax credit shall not be available in respect of the following, namely:- 2 [(a) ..................; (aa).................; (ab).................; (b) 3 [the following supply of goods or services or both- (i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) except when used for the purposes specified therein, life insurance and health insurance: Provided that the input tax credit in respect of such goods or services or both shall be available where an inward supply of such goods or services or both is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw 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 subsection (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 subsection (5) of section 17 of the CGST Act is applicable to the whole of clause (b) of subsection (5) of section 17 of the CGST Act. 5 Whether various perquisites provided by the employer to its employees in terms of contractual agreement entered into between the employer and the employee are liable for GST? 1. Schedule III to the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Circular No. 172/04/2022-GST, it is clarified that perquisites provided by the 'employer' to the 'employee' in terms of contractual agreement entered into between the employer and the employee, will not be subjected to GST when the same are provided in terms of the contract between the employer and employee. We find that factually there is no dispute as far as [a] the canteen facility is provided by the applicant as mandated in Section 46 of the Factories Act, 1948 is concerned; and [b] the applicant has provided [one page] a copy of the agreement for cafeteria /canteen services to employees wherein in terms of Para 14.3, it is stated as follows: Policy In corporate and plant locations, Cadila provides employees multiple options on the variety of food served. There are snacks, mini-meals as well as regular balanced meals that are served. Meals and snacks are provided on a cost sharing basis while business meetings are borne by the Company. Type of Food /Drink Timings Location Meals Breakfast Lunch 8.00 am to 9.00 am 12.30 pm to 1.30 pm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t means an establishment which carries on, any business, trade, manufacture or any journalistic or printing work, or business of banking, insurance, stocks and shares, brokerage or exchange or profession or any work in connection with, or incidental or ancillary to, any business, trade or profession or manufacture; and includes, - (i) establishment of any medical practitioner (including hospital, dispensary, clinic, polyclinic, maternity home and such others), architect, engineer, accountant, tax consultant or any other technical or professional consultant; (ii) a society registered under the Societies Registration Act, 1860, and a charitable or other trust, whether registered or not, which carries on, whether for purposes of gain or not, any business, trade or profession or work in connection with or incidental or ancillary thereto; (iii) shop, residential hotel, restaurant, eating house, theatre or other place of public amusement or entertainment; to whom the provisions of the Factories Act, 1948 do not apply ; (iv) such other establishment as the State Government may, by notification in the Official Gazette, declare to be an establishment for die purposes of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e from 1.2.2019, based on the recommendation of the GST council in its 28th meeting, the proviso after sub clause (iii) of clause (b) of Section 17(5) of the CGST Act, 2017 is applicable to the whole of clause 17(5)(b), ibid. 22. In view of the foregoing, we hold that Input Tax Credit will be available to the appellant in respect of food and beverages as canteen facility is obligatorily to be provided under the Factories Act, 1948, read with Gujarat Factories Rules, 1963 and Gujarat Shops and Establishment (Regulation of Employment and Condition of Service) Act, 2019 as far as provision of canteen service for full time/direct employees working on permanent basis at the factory/corporate office is concerned. It is further held that the ITC on GST charged by the canteen service provider will be restricted to the extent of cost borne by the appellant only. Our view is substantiated by the Ruling of the Gujarat Appellate Authority for Advance Ruling order No. GUJ/GAAAR/Appeal/2022/23 dated 22.12.2022 in the case of M/s. Tata Motors Ltd, Ahmedabad. 22. In view of the foregoing, we hold that Input Tax Credit will be available to the appellant in respect of food and beverages ..... X X X X Extracts X X X X X X X X Extracts X X X X
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