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TMI Blog2024 (2) TMI 848X X X X Extracts X X X X X X X X Extracts X X X X ..... he applicant provides meals which include breakfast, lunch, dinner, tea and snacks. The applicant has entered into an agreement dated 15.7.2020 with M/s. Shashi Catering Service Private Ltd, a canteen service provider [for short- CSP], to provide food and beverages to its employees. 5. As per the aforementioned agreement, the CSP shall prepare the meals in accordance with the weekly menu specified by the applicant. Further, the applicant will provide kitchen utensils and equipment etc. (e.g. dish wash machine, work table, water cooler, table etc.), as specified in Annexure-I) of the agreement to the CSP, which shall be returned to the applicant on termination of the arrangement. 6. The applicant provides canteen facilities to its employees in terms of the Meal Policy dated 1.4.2016. Article-1 of the policy specifics the objective as under: "To provide hygienic meal to all employees of SMG as well as to SMC employees who are on deputation/business travel and to regulate this provision for other visitors. Tor the purpose of this policy meal shall signify tea and breakfast in the morning lunch/dinner followed by tea in the second half of the work day". The applicant is providing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which may be in monetary terms/in any other form except in case of deeming provision as specified in Schedule-I; * that the supply of goods or services or both shall be effected by a person in the course or furtherance of business; * that though the CSP is issuing invoice to the applicant, the beneficiaries of the canteen facility are the employees of the applicant; * that the applicant only acts as a mediator between the employees and the CSP and does not retain any profit margin while recovering the amounts from its employees; * that the nominal amount recovered by the applicant from employees towards the meals, is only towards the expenditure/costs for providing such meals; * that the applicant further relies on the * ruling of the Madhya Pradesh Appellate Authority for Advance Ruling in M/s Bharat Oman Refineries Ltd. 2021-TIOL-36-AAAR-GST; * ruling of the Haryana Authority for Advance Ruling in M/s Rites Limited 2022-VILL-283-44R; * Bombay High Court judgement in the case of Bai Mumbai Trust and Ors' 2019 (9) TMI 929; * ruling of GAAAR in the case of M/s. Amneal Pharmaceuticals Pvt. Ltd 2021 (9) TMI 1293; * ruling of GAAR in the case of M/s Dishman Car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision/ruling of the * GAAR in the ease of M/s. Cadila Pharmaceuticals Limited 2023 (4) TMI 298; * GAAR in the ease of M/s. AIA Engineering Limited 2023 (4) TMI 297; * GAAR in the case of M/s. Troikaa Pharmaceuticals Limited 2022 (9) TMI 200; * GAAR in the case of M/s Zydus Lifesciences Limited 2022 (10) TMI 304; * GAAR in the case of M/s SRF Limited 2022 (10) TMI 305. 11. On the second issue regarding admissibility of ITC on Input service of CSP, the applicant has made the following submission viz * that the canteen services procured by the applicant from the CSP are in the nature of 'input services' u/s 2(60) of the CGST Act, 2017 since the same have been procured to be used in the course and furtherance of business; * that under section 46 of the Factories Act, the applicant is mandated to provide the canteen facility to the workers working within the factory premises; * that they are entitled to avail ITC of GST paid to the CSP by virtue of the proviso to section 17(5)(b) & 16(1) of the CGST Act; * in this regard, they wish to rely on the following rulings * GAAR Ruling in M/s Troikaa Pharmaceuticals Limited 2022 (9) TMI 200, ibid; * Bharat Om ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the terms of the agreement to provide them with kitchen utensils and equipment like watercooler, dishwasher, plates, worktable, table etc.; * that on termination, the CSP shall vacate the premises and hand over all the kitchen utensils and equipment to the applicant; that in the instant case, the ownership over the kitchen utensils and equipment always remains with the applicant; * that the canteen facility for the employees within the factory premises has been mandated in terms of section 46 of the Factories Act, 1948; that to facilitate the preparation and serving of the meal, the applicant has purchased certain kitchen utensils and equipment; that the inward supply of kitchen utensils and equipment is in course or furtherance of business and hence, ITC is eligible on such utensils and equipment. 14. In view of the foregoing, the applicant has filed this application for advance ruling raising the following questions viz 1) Whether GST is liable to be discharged on the portion of the amount recovered by the applicant from its employees towards the canteen facilities provided to them? 2) Whether the applicant is eligible to avail input tax credit in respect of the GS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible to avail ITC in respect of the GST paid on inward supplies used for providing canteen facility to the personnel on deputation. However, the applicant failed to provide copy of deputation letter, as stated during the course of personal hearing. Discussion and findings 17. 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, a reference to the CGST Act would also mean a reference to the same provisions under the GGST Act. 18. 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. 19. Before adverting to the submissions made by the applicant, we would like to reproduce the relevant sections, circular, press release etc., for ease of reference: * Section 7. Scope of supply.- (1) For the purposes of this Act. the expressio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .............: (b) 18[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 hath 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.] [18. by s. 9 of The Central Goods and Services Tax (Amendment) Act, 2018 (No. 31 of 2018) - Brought int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are on third party roll working within the factory premises]. Employees of SMC on deputation, employees of MSIL on business travel and Temporary/Contract worker's portion of canteen charges 24. The applicant has submitted that they are providing canteen facilities at subsidized rate to employees of SMC on deputation, employees of MSIL on business travel and temporary workers [including team lease employees who are on third party roll working within the factory premises] i.e. 70% of the total amount of food is being borne by the applicant and residual 30% amount is recovered from the aforementioned employees/worker. These workers are not employees of the applicant but they are working in the company on account of either deputation or through a contract. The other employees are present in the factory premises on account of business travel. These workers are not 'employee' as they are not on the pay roll of the applicant. 25. The term 'contract labour' under Contract Labour (Regulation and Abolition) Act, 1970 ("CLRA") means a person who is hired in or in connection with the work of an establishment by or through a contractor. It is important to note that the wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forces of the Union 28. The applicant's contention is that employees of SMC on deputation, employees of MSIL on business travel and temporary workers (including team lease employees who are on third party roll working within the factory premises] are primarily engaged for carrying out the activity which is either directly or indirectly related to manufacturing activity. The contractual worker in the instant case, is under scope of definition of "Worker" as stipulated under Section 2(/) to be read with Section 46 of the Factories Act, 1948. 29. The term 'employed' is not defined under the GST, therefore, we refer to the dictionary meaning. The Law Lexicon says that the word 'employed' means engaged or occupied in the performance of work or hired to perform labour. Contractor pays the salary to the temporary/contractual worker. In respect of workers on deputation/business travel also it is not the claim of the applicant that they pay the salary that these workers are on their pay roll. These workers are supplied by the contractor to the applicant for carrying out activity in the factory premises. CBIC vide its Circular No. 172/04/2022-GST dated 6.7.2022 has cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members; (f) admission, for a consideration, of persons to any premises: (g) services supplied by a person as the holder of an office which has been accepted by him in the course or furtherance of his trade, profession or vocation: (h)5[activities of a race club including by way of totalisator or a license to book maker or activities of a licensed book maker in such club: and] (i) any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities: From the plain reading of the definition of "business", it can be safely concluded that the supply of food by the applicant to its contractual worker, employees of SMC on deputation, employees of MSIL on business travel, would definitely come under clause (b) of section 2(17) as a transaction incidental or ancillary to the main business as the contractual worker are working for the company to run the business activity of the applicant. 33. Schedule II to the CGST Act, 2017, describes the activity to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a subsidized cost through CSP. The supply of food by the applicant is 'supply of service' by the applicant to such worker/s, the cost, which is recovered from the workers, as deferred payment is 'consideration' for the supply and GST is liable to be paid. 36. In view of the above we hold that recovery' of amount from such employees/worker on account of third party canteen services provided by the applicant to employees of SMC on deputation, employees of MSIL on business travel and temporary workers [including team lease employees who are on third party roll working within the factory premises] would fall within the ambit of the definition of 'outward supply' as per section 2(83) of the CGST Act, 2017 and is therefore, liable to tax as a supply under GST. Input Tax Credit (ITC) [in respect of permanent employees of applicant] 37. The next question on which the applicant has sought ruling is whether ITC of GST charged by the CSP can be availed by the applicant. In this connection, before proceeding further, certain factual aspects which we would like to mention, though at the cost of repetition are viz * that they employ more than 250 employees; * ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, is liable to tax as a supply under GST. However, in terms of section 17(5)(b)(i), ITC is restricted in respect of supply of food and beverages. Thus, the applicant is not eligible for ITC in respect of the GST charged by the CSP for the canteen facilities provided to employees on deputation, employees on business travel and temporary/contract workers in terms of section 16 of the CGST Act, 2017. Input Tax Credit (ITC) on equipment, kitchen utensils utilized for providing canteen facilities to its employees. 41. The applicants contention as listed supra is that they are obligated under the terms of the agreement to provide the CSP with kitchen utensils and equipment like watercooler, dishwasher, plates, worktable, table etc.; that on termination, the CSP shall vacate the premises, hand over all the kitchen utensils and equipment; that ownership of the kitchen utensils and equipment always remains with the applicant; that the inward supply of kitchen utensils and equipment is in course or furtherance of business and hence, ITC is eligible on such utensils and equipment. 42. We have already held that the nominal amount deducted by the applicant from their permanent employ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remises would fall within the ambit of the definition of 'outward supply' as per section 2(83) of the CGST Act, 2017 and therefore, is liable to tax as a supply under GST in terms of para 36. 2) The applicant is eligible to avail input tax credit in respect of the GST charged by the canteen service provider for the canteen facilities provided to its permanent employees in view of the provisions of Section 17(5)(b) as amended effective from 1.2.2019 and clarification issued by CBIC vide circular No. 172/04/2022-GST dated 6.7.2022 read with provisions of section 46 of the factories Act. 1948 and read with provisions of Gujarat factory Rules. 1963. ITC on the above is restricted to the extent of the cost borne by the applicant for providing canteen services to its employees, but disallowing proportionate credit to the extent embedded in the cost of goods recovered from such employees as mentioned in para 39. 3) The applicant is not eligible to avail ITC in respect of the GST charged by the canteen service provider for the canteen facilities provided to employees of SMC on deputation, employees of MSIL. on business travel and temporary workers [including team lease employees ..... X X X X Extracts X X X X X X X X Extracts X X X X
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