TMI Blog2024 (1) TMI 170X X X X Extracts X X X X X X X X Extracts X X X X ..... contractor), for providing quality food and refreshments to its employees. Canteen contractor charges as per the agreed price per meal from Applicant. It is raising invoice under SAC 996333 and is charging GST @ 5% from Applicant. This authority is constituted to decide on matters or questions specified in sub-section (2) of Section 97, in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant. Thus, the applicant is not a supplier in the present case, the applicant as per the contract is a receiver of services supplied by the canteen service provider also. The scope of the ruling for Authority for Advance Ruling (AAR) is limited to the transactions being undertaken or proposed to be undertaken. In the instant case, as already narrated, the application seeking advance ruling was filed on 21.03.2023 before the RAAR with respect to supplies already being undertaken and GST has been already paid. Hence, the case is out of the purview of the Advance Ruling. As per Section 95 of CGST Act, 2017; this authority shall decide on matters or on questions specified in sub-section (2) of Section 97, and Authority means the Aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plicant. The canteen service provider is raising its invoices on Applicant and Applicant is making recoveries at subsidized rate from the salary of its employees for canteen facility. Applicant wishes to know whether the activity of providing food at subsidized price to employees, can be considered as supply of service by Applicant to its employees. Applicant further wishes to know whether it Is eligible to take input tax credit of the GST charged by contractor for canteen services availed by it for its employees. B Interpretation and understanding of applicant on question rose (in Brief) The applicant submitted his interpretation which Is under- 1. Shriram Pistons and Rings Limited ( Applicant ), is engaged in manufacture and supply of automobile parts (two wheelers and four wheelers) viz. engine parts such as pistons, piston rings, engine valves etc. at its manufacturing unit (factory) located at Pathredi, Rajasthan. 2. Applicant is a company incorporated under the Companies Act, 1956. it has various manufacturing, research and development centers and branch offices located In different states and accordingly Applicant has obtained GST registration in the res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ( CGST Act ) and Rajasthan Goods and Services Tax Act, 2017 ( RGST Act ), entails that an advance ruling may be filed by Applicant on the following questions: a) Classification of any goods or services or both; b) Applicability of a notification issued under the provisions of this Act; c) Determination of time and value of supply of goods or services or both; d) Admissibility of input tax credit of tax paid or deemed to have been paid; e) Determination of the liability to pay tax on any goods or services or both; f) Whether the applicant is required to be registered; g) Whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term. 2. At the outset, it is made clear that the provisions of both CGST Act and RGST Act and rules made there under are same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act and CGST Rules would also mean a reference to the same provisions under the RGST Act and RGST Rules and vice versa. 3. Applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 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; (1A) where certain activities or transactions constitute a supply in accordance with the provisions of sub-section (1), they shall be treated either as supply of goods or supply of services as referred to in Schedule II. (2) Notwithstanding anything contained in sub-section (1), (a) activities or transactions specified In Schedule III; or (b) such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council, shall be treated neither as a supply of goods nor a supply of services SCHEDULE III [See section 7] ACTIVITIES OR TRANSACTIONS WHICH SHALL BE TREATED NEITHER AS A SUPPLY OF GOODS NOR A SUPPLY OF SERVICES 1. Services by an employee to the employer in the course of or in relation to his employment. [Emphasis Supplied] 10. Section 7(2) of the CGST Act, begins with a non-obs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is further submitted that the nominal amount recovered from employees is only towards recovery of part of the cost of food facility extended by Applicant. Bearing of part of cost by employees will not alter the nature of transaction. It is all part of one facility extended by employer, where the cost is partly borne by Applicant and partly by employees. Therefore, in absence of any supply by Applicant, no GST is payable on the recoveries made by Applicant from its employees. 18. Also, the press release issued by Central Board of Indirect Tax and Customs (CBIC ) on 10.7.2017, clarified the aspect with respect to taxability of perquisites supplied by the companies to their employees. In the last paragraph of the said press release, it was clarified that where free housing or membership of club, health centre etc. is provided to employees free of cost under the contract of employment and if cost of such services forms part of the CTC of employees, then no GST will be payable on such services provided by employer to employee. The relevant part of the said press release is reproduced below: Another issue is the taxation of perquisites. It is pertinent to point out here that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of canteen charges, which is collected by Applicant and paid to canteen contractor. 21. It is submitted that the subject activity or transaction, if any, is undertaken in the course of employment or in connection with employment and does not amount to supply of goods or services by virtue of Section 7(2) read with Entry 1 of Schedule III. Also, as per the Press release issued by the Ministry of Finance dated 10.7.2017, services provided by employer to employees in terms of the contractual agreement entered between employer and employee will not be subjected to the GST. 22. It is abundantly clear that any services provided by employer to employees in course of employment relationship will not be subjected to GST. This is more so, when the amount charged by Applicant Is fully paid to the third-party contractor and no profit or pecuniary benefit is involved In this activity, and thus, there Is no consideration at all. Hence, the provision of canteen facility is excluded from the purview of supply. 23. Therefore, Applicant humbly submits that canteen facility provided by Applicant to its employees does not qualify as supply. Therefore, GST is not payable on canteen facility pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The bill for the supply of food to employees was paid by applicant and applicant was also collecting a specified amount from employees which was less than the amount paid to canteen contractor. In the aforesaid factual matrix, applicant sought ruling on the question as to whether provision of subsidized lunch and refreshments to employees through contractors Is to be treated as supply and if yes under which tariff classification it has to be classified. The Hon ble Authority held that applicant merely pays the part consideration towards the cost of lunch and is not engaged in providing any supply. e. In Re: Dishman Carbogen Amcis Ltd., 2022 (62) G.S.T.L. 245 (A.A.R. GST Guj.), wherein it was held that GST is not leviable on the part amount collected from employees in respect of canteen charges and paid to canteen service provider. f. In Re: Iran Pharmaceutical Ltd., 2022 (62) G.S.T.L 83 (A.A.R. GST Guj.), wherein it was held that GST not leviable on amount representing employees portion of canteen charges at hands of applicant. 27. In the above-mentioned rulings, It has been consistently ruled by the Hon ble Advance Ruling Authority of various states th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he expression supply Includes (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; (b) import of services for a consideration whether or not in the course or furtherance of business; (c) the activities specified in Schedule I, made or agreed to be made without a consideration; and (d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II. [Emphasis Supplied] 35. Section 7 (1)(a) of CGST Act defines the term supply widely to include all forms of supply of goods or services or both such as sale, transfer, disposal, etc. made or agreed to be made for a consideration in the course or furtherance of business. Therefore, in order to constitute supply under Section 7 (1)(a) of the CGST Act, the following key elements are required to be satisfied: a. Supply of goods or/and services; b. Consideration; c. In the course or furtherance of business. 36. It is clear from the above that in order to constitute supply under Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y when there is any activity done in the course of business or furtherance of business. It Is clear from the above discussion that business means any activity in the nature of trade, commerce, manufacture, etc. 40. Further, Section 7(1)(c) of the CGST Act provides that the scope of supply includes activities specified in Schedule I, made or agreed to be made without consideration. 41. Entry 2 to Schedule I of the CGST Act provides that supply of goods or services or both, between related persons or between distinct persons as specified in Section 25 of the CGST Act, when made in the course or furtherance of business shall be considered as supply even if made without consideration. 42. Explanation (a) to Section 15 to the CGST Act defines related for the purposes of the CGST Act. Explanation (a)(ii) provides that employer and employee are deemed to be related persons. 43. On a conjoint reading of the above provisions, any supply of goods or services between employer and employee in the course or furtherance of business even without consideration will be treated as supply for the purposes of Section 7 of the CGST Act. 44. It is submitted that Applicant is engaged in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that, had Applicant been engaged In the business of canteen services, Applicant would have been required to obtain the requisite registration and undertake necessary compliance under the FSSAI regulations. The relevant provisions under FSSAI Act are extracted below: Section 3 (1) (n) Food business means any undertaking, whether for profit or not and whether public or private, carrying out any of the activities related to any stage of manufacture, processing, packaging, storage, transportation, distribution of food, import and Includes food services, catering services, sale of food or food ingredients; Section 3 (1) (o) food business operator in relation to food business means a person by whom the business is carried on or owned and is responsible for ensuring the compliance of this Act, rules and regulations made there under; [Emphasis Supplied] 52. From the above, the term food business means any undertaking involved in the activities related to manufacture, processing, packaging, storage, transportation and in distribution of foam It also provides that a food business operator is a person who carries or owns a food business and is responsible fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or incidental or ancillary to the principal business of automotive components. 59. In this regard, it is submitted that the connected activities or incidental or ancillary activities cannot be construed to include all activities carried out by the business. Furthermore, as per Black s Law Dictionary (Ninth Edition), incidental means dependent upon, subordinate to, arising out of, or otherwise connected with (something else, usually of greater importance). Also, the term ancillary Is defined in the Black s Law Dictionary (Ninth Edition) as supplementary; subordinate. 60. The activities which are having direct nexus with the main business can be said to be ancillary or incidental One of such examples could be sale of byproducts. However, canteen facility is not related to or connected with the principal business of supply of automotive components in that manner. Hence, the same cannot be construed as incidental or ancillary to the main business of Applicant. 61. Reliance is also placed on the following judgments: a. Panacea Biotech Limited vs. Commissioner of Trade and Taxes (2013) 59 VST 524 (Del.) b. Deputy Commissioner of Commercial Taxes vs. Thirumagal Mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the Bill of canteen charges inclusive of GST as per the contract. The applicant collects/ recovers the partial amount from the employees and is required to pay the gross amount Inclusive of GST to the canteen service by adding residual amount in the employees portion and Is required to pay gross amount of Bill inclusive of GST to the Canteen Service Provider? [Emphasis Supplied] Copy of the above ruling is enclosed herewith as Annexure-D. 65. It is further submitted that Entry 2 to Schedule I of the CGST Act, referring to supply of goods or services or both between related persons or between distinct persons even without consideration, is also not applicable, since the subject activities/ transactions are not supply of goods or services or both in terms of Schedule Ili of me CGST Act itself, as already discussed earlier. 66. Thus, it is submitted that the part amount collected by Appellant form its employees for providing canteen facility cannot be taxed under GST as supply. APPLICANT IS ELIGIBLE TO CLAIM INPUT TAX CREDIT OF TAX PAID TO CANTEEN CONTRACTOR FOR PROVIDING CANTEEN SERVICES TO APPLICANT. Service provided by canteen contractor Is In course or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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. (Emphasis Supplied) 73. On a perusal of the above provision, it can be seen that ITC with respect to food and beverages (which will also include canteen services) is restricted under GST Law subject to two provisos mentioned in the provision. As per the second proviso (highlighted above in bold and italics), ITC in respect of canteen services sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the factory under Rule 69 ibid. The relevant provision Is reproduced below: 69. Canteens. [(1) x x x] (2) The occupier of every factory notified by the State Government, and wherein more than two hundred and fifty workers are ordinarily employed shall provide in or near the factory an adequate canteen according to the standards prescribed in these rules. [Emphasis Supplied] 78. In view of the above provisions, it is abundantly clear that Applicant is maintaining its canteen under a statutory mandate provided in Section 46 of the Factories Act read with Rule 69 of the Rajasthan Factories Rules. Therefore, Applicant is eligible to am, ITC of the GST paid by canteen contractor, in terms of second proviso to Section 17(5)(b) of the CGST Act. 79. It is submitted that the second proviso is applicable to the entire Section 17(5)(b) of the CGST Act and not only to sub-clause (iii). This has been clarified by the CBIC vide Circular No. 172/04/2022-GST dated 6.7.2022 (issued vide F. No. CBIC-20001/2/2022-GST) in 51. 3, as following: Circular No. 3.72/04/2021-GST F. No. CBIC-20001/2/2022-GST Government of India Ministry of Finance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment. In this regard, reliance is placed on judgment of Hon ble Supreme Court in Commissioner of C. Ex., Bolpur vs. Ratan Melting Wire Industries, 2008 (231) E.L.T. 22 (S.C.). 82. Similar view has been taken by Hon ble UPAAR in Applicant s own case (Advance Ruling No. UP ADRG -16/2022 dated 5.12.2022). 83. Thus, Applicant is eligible to take ITC of the GST paid on the invoices raised by canteen contractor in terms of Section 16(1) of the CGST. The GST has been paid in furtherance to the business as well as is not subject to the rigor of Section 17(5)03) as such facility was provided under a statutory obligation. 84. In view of the above, et is summitted that canteen facility provided by Applicant to Its employees would not amount to supply under GST. Accordingly, GST Is not payable on the amount recovered from employees portion of canteen charges winch is collected by Applicant and paid to canteen contractor. Further, Applicant is eligible to avail ITC of the GST paid on the invoices liaised by canteen contractor for canteen service availed by Applicant for its employees. ISSUES REQUIRING ADVANCE RULING AND APPLICANT S UNDERSTANDING: In the light of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 017 and Rajasthan Goods and Services Tax Act, 2017? (iii) In case answer to (b) is yes, whether GST Is applicable on the amount deducted from the salaries of employees? (iv) Whether Applicant is eligible to take input tax credit on the GST charged by third party contractor for canteen services availed by it for its employees? D. PERSONAL HEARING In the matter personal hearing was granted to the applicant on 26.06.2023. Adv. Shri Narendra Singhvi, Sr. Executive Umesh Chandra Rawat, Authorized Representatives appeared for personal hearing. They reiterated the submission already made in written submission. They relied on various ruling in their favour and particularly ruling in their own case in Uttar Pradesh dated 05.12.2022. They submitted a compilation of relevant legal provisions, circulars, and ruling/judgement. E. COMMENTS OF THE JURISDICTIONAL OFFICER The Jurisdictional Deputy Commissioner, State Tax, Circle-C, Bhiwadi, Divisional Kar Bhawan, Rajasthan, has given his comments vide his letter S.N. 358 dated 12.06.2023 which Is as under- QUESTION AND ANSWER FOR WHICH THE PRESENT MR HAS BEEN FILED Q1. Whether providing food to employees at sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing, namely:- (b) [the (Wowing supply of goods or services or both- (I) food and beverage, 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, cite insurance and health insurance. F. FINDINGS, ANALYSIS CONCLUSION: At the outset we would like to make it clear that the provisions of CGST Act and RGST Act are in pari materia and have the same provisions in like matter and differ from each other only on a few specific provisions. Therefore, unless a mention is particularly made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the RGST Act. 1) We have carefully examined the statement of facts, supporting documents filed by the Applicant We have perused the records on file and gone through the facts of the case and the submissions made by the applicant as well as the department. We have also considered the issues involved, on which advance ruling is sought by the applicant, and relevant facts. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e charges of the meals/snacks are deducted from the salary of the individual employee. The said amount recovered from employees Is paid to canteen contractor along with the remaining portion, which is paid by Applicant. It Is pertinent to note here that Applicant does not retain any part of such amount and moreover, no profit is made by Applicant from such activity. We find that the applicant is involve in providing/ supplying Canteen Services to its employees as well as contract workers. The Applicant has contracted with Third party (hereinafter referred to as the Canteen Service Provider ) to operate Canteen within the Applicant s factory premises; and a part of the cost of the meals provided is deducted by the Applicant from their employees salaries on a monthly basis. 5. Based on the written submission made by the applicant and documents submitted by applicant, we find that applicant have agreements from various firms for supply of man power which is his inward supply and not the question of Law before us. On going through the sample copies of Bills etc. it revealed that the applicant is paying GST against supply of canteen service on recovery basis since long prior to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g under GST can be obtained for a proposed transaction as well as a transaction already undertaken ay the appellant but the transactions on which GST is being paid since long are out of preview of advance ruling. 11. Moreover, on gone through the facts of the case, we observe that applicant filed their application before the Rajasthan Authority for Advance Ruling (RAAR) on 21.03.2023 i.e. much later from the execution of contract on canteen service supplied by him if supplied. We observe that applicant motto is to find out whether the mechanism opted by him for payment of GST on said service is right or wrong, whereas applicant already paying the GST In the matter. which is against the spirit of advance ruling. 12. Since the Applicant has asked for ruling on the transactions effected prior to the date of filing of the application before the RAAR, we find It appropriate to visit the definition of the Advance Ruling given under Section 95(a) of the CGST Act, 2017 which is reproduced as under: 95. Definitions of Advance Ruling In this Chapter, unless the context otherwise requires (a) advance ruling ) means a decision provided by the Authority or the Appella ..... X X X X Extracts X X X X X X X X Extracts X X X X
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