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TMI Blog2023 (11) TMI 658X X X X Extracts X X X X X X X X Extracts X X X X ..... ing, the expression 'GST Act' would be a common reference to both CGST Act and TGST Act. 3. It is observed that the queries raised by the applicant fall within the ambit of Section 97 of the GST ACT. The Applicant enclosed copies of challans as proof of payment of Rs. 5,000/- for SGST and Rs. 5,000/- for CGST towards the fee for Advance Ruling. The Applicant has declared that the questions raised in the application have neither been decided by nor are pending before any authority under any provisions of the GST Act. The application is therefore, admitted. 4. Brief facts of the case and averments of the applicant: 4.1 The applicant M/s. Kirby Building Systems & Structures India Private Limited, Sangareddy are into the manufacture & supply of pre-engineered buildings and storage racking systems. The applicant averred that they are providing canteen and transportation facilities to its employees at subsidized rates as per the terms of the employment agreement entered between the applicant and the employee. The applicant provided copies of employment agreement in Annexure-3 to the application. At Para 8.2 of the agreement it is enshrined that the "Company will provide transportation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the applicant in terms of the contract between the employer and employee. Therefore that the applicant is eligible for the input tax credit on the tax paid on hire of such vehicles. 4.2 Company Background: Kirby Building Systems is a 100% subsidiary of Kuwait- based Alghanim Industries. Kirby's product list consists of pre-engineered steel buildings (PEB) applicable for factories, warehouses, metro rails, supermarkets, aircraft hangars, sports stadiums, auditoriums, etc. Other products include structural steel, sandwich panels, storage solutions, Kirby Roof (KR), Kirby Wall (KW), Kirby Deep Decking Panel and Kirby Standing Seam Panel (KSS-600). 5. Questions raised: 1. Whether GST is liable to be discharged on the recoveries being made by the applicant from its employees towards the canteen and transportation facilities provided to them? 2. Whether the applicant is eligible to avail input tax credit in respect of the GST paid on inward supplies used for providing canteen and transportation facilities? 6. Personal Hearing: The Authorized representatives of the unit namely G. Jagannath, Advocate and P. Veera Reddy, General Manager attended the personal hearing held on 15. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arges to be incurred for the food, the food stuff served, a profit up to five per cent on its working capital employed in running the canteen. (2) In computing the prices referred to in sub-rule (1) the following items of expenditure shall not be taken into consideration, but will be borne by the occupier (a) the rent for the land and building; (b) the depreciation and maintenance charges of the building and equipment provided for the canteen; (c) the cost of purchase, repairs and replacement of equipment including furniture, crockery, cutlery, and utensils; (d) the water charges and expenses for providing lighting and ventilation (e) the interest for the amount spent on the provision and maintenance of the building, furniture and equipment provided for the canteen; (f) the cost of fuel required for cooking or for heating stuffs or water; and (g) the wages to the employees servicing of the canteen and the cost of uniforms, if any provided to them (3) The charges per quantity of foods stuffs, beverages and any other item served in the canteen shall be conspicuously displayed in the language understood by the majority of workers. If the applicant has recovered all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the employees at clause 8.3 of the copy of the employment agreement provided by them. 9.2 The Section 46 of the Factories Act, 1948 prescribes for maintaining the canteens by factories as follows: "Canteens- (1) The State Government may make rules requiring that in any specified factory wherein more than two hundred and fifty workers are ordinarily employed, a canteen or canteens shall be provided and maintained by the occupier for the use of the workers." As seen from the above statutory provisions of the Factories Act, 1948, the factories with a specified number of employees are mandated to provide and maintain a canteen for such employees. 9.3 Clarification on various issues of section 17(5) of the CGST Act as per point no.3 of Circular No. 172/04/2022-GST dated 6 th July, 2022 issued by CBIC is produced below: Whether the proviso at the end of clause (b) of sub-section (5) of section 17 of the CGST Act is applicable to the entire clause (b) or the said proviso is applicable only to sub-clause (iii) of clause (b)? 1. Vide the Central Goods and Service Tax (Amendment Act) 2018, clause (b) of sub-section (5) of section 17 of the CGST Act was substituted with effect f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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.] 9.5 As per Section 17(5)(b) of CGST/TGST Act' 2017 input tax credit in respect of such canteen facilities shall be available, where it is obligatory for an employer to provide the same to its employees under Factories Act, 1948 being in force. The same is clarified by Circular No. 172/04/2022-GST dated 6th July, 2022. As stated by the taxpayer he is a registered unit under Factories Act, 1948. 9.6 Perquisites provided by employer to the employees as per contractual agreement as per point no. 5 of Circular No. 172/04/2022-GST dated 6th July, 2022 is produced below: 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplies, namely:- (A) further supply of such vessels or aircraft; or (B) transportation of passengers; or (C) imparting training on navigating such vessels; or (D) imparting training on flying such aircraft; (ii) for transportation of goods; (ab) services of general insurance, servicing, repair and maintenance in so far as they relate to motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa): Provided that the input tax credit in respect of such services shall be available- (i) where the motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) are used for the purposes specified therein; (ii) where received by a taxable person engaged- (I) in the manufacture of such motor vehicles, vessels or aircraft; or (II) in the supply of general insurance services in respect of such motor vehicles, vessels or aircraft insured by him;] (b) [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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Credit ? The view held by Hon'ble High court is produced below: "The transportation of employees from distance of about 40 kms for reaching factory is not an activity which could be said to be a part of manufacturing activity. It is merely for personal convenience of the employees to enable them to reach the premises of the factory so as to thereafter participate in the manufacturing activity. In this regard, the reliance is placed on the judgment of the Karnataka High Court in Toyota Kirloskar Motor Private Limited vs THE COMMISSIONER OF CENTRAL TAX wherein food and beverages were provided by the appellant therein to its employees by engaging the services of an outdoor caterer. This was sought to be treated as "input service" since there was a statutory duty on the appellant to establish a canteen for its employees. Considering the effect of definition of "input service" after 01.04.2011 it was found that establishment of such canteen was primarily for personal use or consumption of the employees and after such amendment no cenvat credit could be availed. This view has been upheld by the Hon'ble Supreme Court while dismissing the Special Leave Petition on 18.11.2021 prefer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mployer and his employees as submitted by them, are in lieu of the services provided by them to their employees in relation to employment. Therefore the perquisites provided by the employer to the employee, in terms of contractual agreement, will not be subjected to GST. However if the employer makes taxable supply of canteen services to employees by charging consideration for the purpose of business, instead of providing them as a perquisite, the same will be subject to payment of GST, at prescribed rates, as per provisions of CGST/TGST Act'2017. 2. Whether the applicant is eligible to avail input tax credit in respect of the GST paid on inward supplies used for providing canteen facilities? As per Section 17(5)(b) of CGST/TGST Act'2017 input tax credit in respect of such canteen facilities shall be available, where it is obligatory for an employer to provide the same to its employees under Factories Act, 1948. 3. Whether GST is liable to be discharged on the recoveries being made by the applicant from its employees towards the transportation facilities provided to them? The transportation services, if provided as a perquisite by the employer to the employee, in terms of con ..... X X X X Extracts X X X X X X X X Extracts X X X X
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