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TMI Blog2023 (6) TMI 1147X X X X Extracts X X X X X X X X Extracts X X X X ..... In terms of Section 104 of the Act, where the Authority finds that advance ruling pronounced by it under sub-section (4) of Section 98 or under sub-section (1) of section 101 has been obtained by the applicant by fraud or suppression of material facts or misrepresentation of facts, it may, by order, declare such ruling to be void ab initio and thereupon all the provisions of this Act or the rules made thereunder shall apply to the applicant as if such ruling had never been made. 5. At the outset, we would like to make it clear that the provisions of both the Central Goods and Service Tax Act and the Tamil Nadu Goods and Service Tax Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Service Tax Act would also mean a reference to the same provisions under the Tamil Nadu Goods and Service Tax Act. M/s Good Hands Facility Management Services, Plot No. 35, 3rd Street, Jemi Nagar, Pattunoolchathiram, Sriperumbudur-602105 (hereinafter called the Applicant) are registered under GST with GSTIN 33AAQFG2906D1ZO. The applicant has sought Advance Ruling on the following questions: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and diesel expenses (incurred when power generators are run) will be reimbursed at actual as outlined in the contract clause. There is no separate rent on using the diesel generator as the same is provided without separate charge by landlord. 2.1.3 Hostel facility is common for all workers and being used by workers sourced from other staffing agencies as well. Hence, their role will be a mere 'contractor' facilitating the services on the request of client and have to pass on the bills to client separately for each of the service on actual basis. They will bill the client a separate service charge with 18% GST for the facilitation work. 2.1.4 Input credit is not availed by their client on consuming any of those services. 2.2.1 As per statement of facts, the applicant state that Outward food supply at 5% tax - as they are deeming the supply to be an independent one and not a mixed supply, they will bill food at the same 5% rate charged by the vendor (who charges it as per S. No. 7(a)(i) of Notification No. 13/2018). 2.2.2 Input tax on food supply received - as ultimate consumer of food is their client and the cooked food is supplied by Caterer (Food vendor) at the hostel premise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h or as an element of a taxable composite or mixed supply. Hence, they reiterate that they get inward supply of food for making outward taxable supply of the same food. In addition, section 15(2) states that taxes levied under CGST/ SGST shall not be value of supply if charged separately by the supplier - i.e., no tax on tax - this when read with section 17(5)(b)(i) makes it clear that they can avail input on food supply received for making outward supply of the same food. 2.3.3 Electricity charges of hostel taken on rent: As TNEB does not levy tax in line with section 7(2)(b) of CGST Act, 2017 on electricity and contractually they are acting as "Pure agent" to receive electricity charges as reimbursement of actuals, they are not charging GST. 2.3.4 Diesel charges for generators at hostel premises: As per section 9(2) of CGST Act, 2017, diesel is considered non-GST supply until notified. As contractually they are acting as "Pure agent" to receive diesel charges as reimbursement of actuals, applicant will not be charging GST as fuel pump does not charge GST at present on diesel supply as per section 9(2). 2.3.5 The applicant confirm that they meet the conditions laid down by Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etween M/s A.C.T. Educational & Charitable Trust and M/s Good Hands Management Services. * Security Services Agreement (Walsons-TN) dated 19.12.2020 between M/s Good Hands Management Services and M/s Walsons Services Private Limited. * Housekeeping & Maintenance Services Agreement (Dorm No. 16-ACT Dorm-Nelvoy) dated 16.09.2020 between M/s Good Hands Management Services and M/s Star Delight Facility Services. * Invoice No. 402 dated 04.05.2021 for Rs. 959381/- (including GST@ 5%) issued by M/s Good Hands Management Services to M/s Rising Stars Mobile India Private Limited towards reimbursement of food expenses enclosing Invoice No. FB/21-22/04/010 dated 29.04.2021 for Rs. 959381/- (including GST @ 5%) issued by M/s Indrayani Biotech Limited to M/s Good Hands Management Services towards supply of Breakfast, Lunch, dinner and Egg curry to 6996, 9983, 11719 and 721 numbers respectively during the period from 21.03.2021 to 20.04.2021 at ACT College. * Invoice No. 420 dated 04.05.2021 for Rs. 843941.71 (including GST @ 18%) issued by M/s Good Hands Management Services to M/s Rising Stars Mobile India Private Limited towards reimbursement of Security services in ACT Dorm-Nelvoy by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... month of May 2021 contract employees, employer PF contribution, ESI contribution and Service charges. * Written submission on interpretation as to how various supplies based on an agreement are neither mixed supply nor composite supply. 3.3 Sri M.Saravanan, Partner of the applicant Firm and AR Sri S. Sankara Subramaniam appeared for the virtual hearing on 20.07.2022. The AR was asked whether there is separate agreement for hostel services, he replied that Master Agreement is entered into for Manpower supply and Renewal cum Amendment Agreement includes rent, maintenance, security and food charges. He stated that no separate agreement for providing hostel services with client. On being asked about inclusion of diesel charges and exclusion of electricity charges from the maintenance value charged by Star Delight Facility Services, the AR stated that they are charging GST inclusive of diesel charges and are before the Authority for seeking clarification as to whether diesel charges should be included in the maintenance charges. The AR vide email dated 25.07.2022 clarified that although the addendum is signed for provisioning of hostel services, it may be terminated anytime when the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) thereof. 4.3 The taxpayer can take 5% ITC as per first proviso to section 17(5)(b)(i) of CGST Act. 2017 and also there is no condition specified under SI. No. 7(ix) of Notification No. 11/2017 CT (Rate) dated 28.06.2017 for not taking ITC. 4.4 With regard to electricity charges of hostel premises taken on rent and diesel charges for backup gensets at hostel premises, no comments were offered as they are not within the purview of GST taxation. 4.5 The first proviso to section 17(5)(b)(i) of CGST Act, 2017, stipulates that ITC is available on rent, security and housekeeping services, wherein an inward supply is used for making an outward taxable supply of the same category. 5. The State Jurisdictional Authority has submitted that GST audit has not been conducted by any State Authorities. 6. We have carefully examined the statement of facts, supporting documents filed by the Applicant, all the additional submissions made during the hearings and the submissions of the Jurisdictional authorities. The applicant engaged in the business of supply of manpower to client in the manufacturing sector through manpower supply agreement between the applicant and M/s Rising Stars Mobile In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rights and obligations of the applicant in relation to the scope of outward supply and the use of inward supplies in relation to outward supplies or otherwise. 8.1.1 Manpower Supply Agreement dated 14.07.2017 between the applicant and M/s Rising Stars Mobile Private Limited (RSM) states that every Manpower shall exclusively be engaged by applicant; under no circumstances shall the relationship of employer and employee deem to arise between RSM and Manpower. Applicant warrants that Manpower arrangements made by applicant shall strictly be under the supervision of applicant. 8.1.2 The applicant shall make payment to ESI, PF and other relevant authorities. 8.1.3 RSM at its sole discretion may provide canteen facilities to the Manpower and these facilities are liable to be withdrawn on seven (7) days prior notice to applicant and therefore applicant shall keep themselves prepared with alternative arrangements to provide healthy and hygienic food to the Manpower at their own cost, in the event RSM discontinues canteen facilities to Manpower. 8.1.4 The term "Manpower" means male or female personnel of applicant aged not less than eighteen (18) years being engaged by applicant as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2.4 It is agreed between the parties that in the event the RSM is not in a position to utilize the services of applicant due to force majeure condition including epidemic deceases or due to reasons attributed to applicant, RSM shall have no obligation to pay for the services ordered but not utilized and also if the RSM is of the opinion that the possibility of the usage of the services of applicant is difficult to determine, RSM has the option to terminate this agreement at a shorter written notice of seven days. 8.2.5 In case the tax authorities recover any amount from RSM towards non-deduction of tax or disallows any expenditure u/s 37 of IT Act, 1961 with respect to the payments made to applicant along with interest and penalty the RSM shall be entitled to recover the same along with interest from applicant. 8.2.6 All the terms and conditions of Parent / Renewal / amendment agreements shall remain mutatis mutandis, remains unchanged (except to the extent of the terms mentioned above) and therefore all other terms, conditions, covenants, rights and obligations of the parties arising out of the Parent / Renewal / Amendment agreement shall continue to bind and govern the parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form. 8.4.6 Even within the hostel services the agreement stated that services as obtained from each service provider is to be billed as such to client with specific conditions against each element within the service. 9.1 The applicant has raised various questions revolving around eligibility to claim ITC on several services / goods procured and the value of such invoices recovered from client through different invoices at same rate of GST on same value and certain supply as pure agent to client. The question before us to decide is whether the applicant is entitled to claim input tax credit on such input goods and services; to decide the rate of GST on such supplies to client and to decide whether the applicant is right in not charging GST on Electricity and Diesel, as a pure agent to client. The advance ruling is sought on the admissibility of input tax credit paid, rate of GST and determination of the liability to pay tax. It requires a comprehensive study of facts of business activity and scope of service required to be provided by the applicant under various agreements with client, in the light of the following statutory provisions of the Acts and Rules relevant to the quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the pure agent from the third party as a pure agent of the recipient of supply are in addition to the services he supplies on his own account. Explanation. - For the purposes of this rule, the expression - pure agents means a person who- (a) enters into a contractual agreement with the recipient of supply to act as his pure agent to incur expenditure or costs in the course of supply of goods or services or both; (b) neither intends to hold nor holds any title to the goods or services or both so procured or supplied as pure agent of the recipient of supply; (c) does not use for his own interest such goods or services so procured; and (d) receives only the actual amount incurred to procure such goods or services in addition to the amount received for supply he provides on his own account. 9.4 The provision relevant to blocked credits is given under Section 17(5) of the Act, which is as under:- (5) Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the following, namely:- (b) the following supply of goods or services or both- (i) food and beverages, outdoor catering, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te Limited (RSM), the service recipient. 10.2 The Manpower Supply Agreement, inter alia, provides that "Manpower" means male or female personnel of applicant aged not less than 18 years being engaged by applicant as casual labourers, permanent employees, contract employees, consultants or engaged in any other capacity by applicant and sent by applicant to RSM to undertake the task for RSM. RSM would provide task schedule as deemed fit by RSM and applicant shall supply Manpower to meet 100% of the needs of RSM based upon the said task schedule and applicant shall ensure that the Manpower has completed task assigned by RSM on a timely manner. Applicant shall appoint such number of coordinators as deem fit by RSM, who shall enforce the assigned task to ensure that all Manpower contribute fully with respect to the task assigned. Applicant on its own shall recruit, hire, train, supervise and direct personnel to render said services. Applicant is solely responsible for transfer and discharge of applicant's representatives. All Manpower shall at all time for all purposes, solely and exclusively be the Manpower of applicant and in no circumstances they shall be treated as personnel of RSM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Parent / Renewal / Amendment agreement shall continue to bind and govern the parties. 10.6 As per Expenses Statement as Annexure 1A to Housekeeping & Maintenance Services Agreement dated 16.09.2020, Drinking Water and Electricity bills will be paid on actuals based on EB bills issued by TNEB. Management fee of 10% will be applicable for the same. Management Fees @ 10% on the monthly service fee applicable for Repairs & maintenance, Recreation cost, Pest control, DTH recharge/Magazines & Others, Sewerage clearance & disposals, Feminine charges, diesel charges and Housekeeping materials. The AR during physical personal hearing stated that Management Fee @ 10% incorporated in the Expenses Statement in 1A to Renewal cum Amendment Agreement of Manpower Supply is paid to the vendor. But, the agreements with the vendors does not have such recital as claimed by the AR. It is beyond doubt that Management Fee @ 10% of various expenses is the entitlement of the applicant and the same has been stated by the applicant under SI. No. 12 of Application for Advance Ruling that they will bill the client a separate service charge with 18% GST for the facilitation work. 10.7 The Renewal Cum am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... teen facility to the labour employed by the contractor. Thus, there is a mandate to the applicant to provide canteen facility to the contractual worker. We find that ITC on foods, beverages, outdoor catering is not blocked, provided it is obligatory for an employer to provide the same to its employees under any law for the time being in force as per proviso to Section 17 (5) (b) after its substitution with effect from 01.12.2019 based on the recommendations of GST Council in its 28th meeting and clarified by CBIC Circular No. 172/04/2022-GST dated 06.07.2022. The rationale of the GST Council for recommending said amendment is reproduced for ready reference; "Presently, in accordance with the provisions of section 17 (5) (b), ITC is not available in respect of food and beverages, health services, travel benefits to employees etc. This sub-section is being amended to allow ITC in respect of such goods or services or both where the provision of such goods or services or both is obligatory for an employer to provide to its employees under any law for the time being in force" (SI. No. 17 of Annexure I to Agenda Item 6 of 28th GST Council Meeting Volume - 1). In the instant case, the app ..... X X X X Extracts X X X X X X X X Extracts X X X X
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