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TMI Blog2023 (7) TMI 142X X X X Extracts X X X X X X X X Extracts X X X X ..... CSP, who is responsible for providing skilled manpower for the preparation of food and maintenance of canteen premises. 4. Being a part of TACO, policies set out by them are applicable group entities. TACO has set out Tata AutoComp Systems Ltd Transport Policy, which states that the canteen policy is applicable to all its group entities. TACO has set out Tata AutoComp Syestms Ltd. Canteen and Transport Policy, which states that the canteen policy is applicable in all employees on the rolls of the Company ie Management staff, staff, workmen, trainees, temporary, etc in Tata AutoComp Systems Ltd and its group entities based in India. They have also specifically reproduced paras 5.01 and 5.02 of their Canteen policy. 5. The applicant has also relied upon the provisions of memorandum of settlements entered into with Tata AutoComp Systems Kamdar Sangh Sanand which states that for employees availing the canteen facility, the applicant shall deduct Rs. 500/- per month from their salary except for contract employees. This deduction finds a mention in their respective salary slip also. 6. The canteen facility is provided at a nominal rate in the course of employment in pursuance of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s statutory obligations under the provisions of Factories Act; o that they would like to rely on the below mentioned rulings/circular which substantiate their averment that no GST is leviable; * Bharat Oman Refineries [MP/AAAR/7/2021] * Hindustan Coca Cola Beverages P Ltd [Appeal No. E/89199/2013] * Cema Electric Lighting Products India P Ltd [Appeal No. E/787/2012] 8. The applicant has further entered into a contract with TSP to provide transportation facility to its employees between the factory premises & the residence in non air conditioned buses having capacity of more than 13 persons. This facility is offered only to employees of the Company. Employees are required to display company issued ID card to board the bus & avail the facility TSP according to the pre approved routes provide the services to the employees. The applicant has further enclosed the transport policy as Annexure 3 and the copy of the agreement with the TSP as Annexure 6. 9. The applicant's contention is that the transportation facility provided to their employees is not in the nature of supply u/s 7 of the CGST Act, 2017 & hence would not be leviable to GST owing to the following reasoning viz o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equivalent to salary for the tenure of notice period not served as a compensation for the breach of the terms of the employment agreement by the employees in accordance with the appointment letter. This amount of notice pay is deducted from full and final settlement of the employee and is not collected as a separate payment from the employee. Further it is deducted to discourage the employees from serving a shorter period and is in a nature of damages for breach of the terms of employment agreement by the employee. 11. The applicant's contention is that they are not liable to pay GST on notice pay owing to the following reasoning viz * that on account of the employment contract, they have a right to deduct an amount from the full & final settlement in lieu of the notice pay, enabling the employee to exit the company early ie to serve a lesser notice period; * in terms of section 7 read with section 2(31) of the CGST Act, 2017, there has to be a co-existence of 'activity' & 'consideration' & the reciprocal relationship between these two is necessary to treat an event as a supply; * the deduction is in accordance with the employment contract between the applicant and the emplo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, a reference to the CGST Act would also mean a reference to the same provisions under the GGST Act. 15. 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 involved, the relevant facts & the applicant's submission / interpretation of law in respect of question on which the advance ruling is sought. 16. Before adverting to the submissions made by the applicant, we would like to reproduce the relevant sections competing tariff entries, for ease of reference: * Section 7. Scope of supply.- (1) For the purposes of this Act, the expression - "supply" includes- (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; 1[(aa) the activities or transactions, by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gery, 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 taxable composite or mixed supply; (ii) membership of a club, health and fitness centre; and (iii) travel benefits extended to employees on vacation such as leave or home travel concession: 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 & 3 by s.9 of The Central Goods and Services Tax (Amendment) Act, 2018 (No. 31 of 2018) - Brought into force w.e.f. 01st February, 2019. * CBIC's press release dated 10.7.2017 Another issue is the taxation of perquisites. It is pertinent to point out here that the servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) of sub-section (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 CGST Act provides that "services by employee to the employer in the course of or in relation to his employment" will not be considered as supply of goods or services and hence GST is not applicable on services rendered by employee to employer provided they are in the course of or in relation to employment. 2. Any perquisites provided by the employer to its employees in terms of contractual agreement entered into between the employer and the employee are in lieu of the services provided by employee to the employer in relation to his employment. It follows therefrom that perquisites provided by the employer to the employee in terms of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mployees in all the shifts in each Manufacturing/Engineering Business Unit at each location, wherever it is feasible to do so, on the basis of number of employees. The canteen services should be managed through a canteen contractor only. No cooking facility will be provided in the premises of the Business Unit/Plants. Adequate facilities for dining hall, serving of food & proper washing/maintenance & storage area will be provided by the BU/Plant Administration. 5.02 Canteen deduction, for all unionized workmen shall be made as per the provisions of respective Wage Settlements. The same will be applicable to other employees working in plant(s) of the Business Unit. However, at some locations, there may be some variation in the amount of deduction for employees other than unionized workmen. In view of the foregoing, we hold that the deduction made by the applicant from the employees who are availing food in the factory would not be considered as a 'supply' under the provisions of section 7 of the CGST Act, 2017. 20. Since the answer to the above is not in the affirmative, the ruling sought in respect of the second question is rendered infructuous. Input Tax Credit 21. The next ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to business they have engaged contractual TSP to provide transportation services to its employees. 26. Now in terms of 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 is provided in terms of the contract between the employer and employee. We find that factually there is no dispute as far as the applicant has provided a sample copy of the employment agreement and a copy of Canteen and Transport policy of Tata AutoComp Systems Ltd, the relevant paras of which are reproduced below viz 06. Transport Facility Transport facility will be provided to all employees in certain shifts in the Manufacturing/Engineering Business Unit at different locations, as per company's policy announced from time to time. However this shall not form a right on the part of the employee(s) at any time and such a facility may be modified or withdrawn, anytime. purely at the discretion of the Management. Till the time such facilities are not provided, the employees will manage on their own and the Company will not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the tenure of notice period not served as a compensation for the breach of the terms of the employment agreement by the employees in accordance with the appointment letter is not leviable to GST. 32. We find that the issue has already been clarified vide Circular no. 178/10/2022-GST dtd 3.8.2022, wherein it is stated as follows: Forfeiture of salary or payment of bond amount in the event of the employee leaving the employment before the minimum agreed period 7.5 An employer carries out an elaborate selection process and incurs expenditure in recruiting an employee, invests in his training and makes him a part of the organization, privy to its processes and business secrets in the expectation that the recruited employee would work for the organization for a certain minimum period Premature leaving of the employment results in disruption of work and an undesirable situation. The provisions for forfeiture of salary or recovery of bond amount in the event of the employee leaving the employment before the minimum agreed period are incorporated in the employment contract to discourage non-serious candidates from taking up employment. The said amounts are recovered by the employ ..... 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