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TMI Blog2025 (4) TMI 801X X X X Extracts X X X X X X X X Extracts X X X X ..... tion No. 12/2017 Central Tax (Rate)? (c) Whether the ITC of the input services received in respect of the services procured in respect of bus transportation services would be available? At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, the expression 'GST Act' would mean CGST Act and MGST Act. 1. FACTS AND CONTENTION - AS PER THE APPLICANT: 1.1 Spicer India Private Limited (hereinafter referred to as 'Applicant') is a company having its registered office at 29th Milestone, Pune, Nasik Highway, Tal-Khed, Village Kuruli, Chakan, Maharashtra-410501 ("Chakan Unit") and having its plant at Gat No. 74/ A adjacent to Addl. MIDC area, Karandwadi, Satara 415004 ("Satara Unit"). 1.2. The Applicant is a company incorporated under the Companies Act, 1956, which is involved in the business of manufacturing of automotive components-mainly axles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsidized rates in the company premises. 1.7. The present application is filed in respect of applicability of Goods and Services Tax (hereinafter referred to as "GST") payable on the recoveries made by the Applicant from its employees for providing the canteen and bus transportation to its employees. Canteen & Bus Transportation 1.8. The Applicant provides canteen and transportation facility to its employees at the Chakan and Satara units based on the employment terms of the Applicant. Further, for providing the canteen facility to the employees, the Applicant has introduced a separate canteen policy. Based on the agreed terms between the Applicant and Employees, the Applicant is entitled to make recoveries at subsidized rates for the canteen and bus transportation facility provided by the Applicant at its factory and corporate office. The relevant clauses of the Canteen Policy are extracted below: Accounting by Biometrics Punching: 2.1 In order to avail meals/snacks services, employees must scan his registered finger through Biometric devices and subsequently the meals/snacks charges as per level will be subtracted from the individual salary. Subsidy rates of Canteen (Snac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to maintain the continuity in manufacturing and research & development work. The factories of the Applicant are located in remote locations. It is submitted that safety for employees and more particularly female employees is very important. Hence, the Applicant provides the bus transportation facility to ensure the safety of the employees and to provide a better working environment. 1.14. Under the aforesaid circumstances, the Applicant seeks the present advance ruling to understand whether the canteen and bus transportation recoveries made by the Applicant are taxable under the GST laws and whether the transportation facility provided to the employees in Non-AC buses having contract carriage permit would be exempted from GST? Apart from the taxability, the Applicants also seeks the advance ruling with respect to the valuation of the said recoveries from the employees. The Applicant also wishes to seek the Advance Ruling with respect to the availability of ITC in respect of input services received for providing bus transportation and canteen facility to its employees. 2. STATEMENT CONTAINING APPLICANT'S INTERPRETATION OF LAW 2.1 The employee recoveries for providing canteen fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (e) provision 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) services provided by a race club by way of totalisator or a licence to 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; ... Emphasis Supplied under: - 2.1.4. A bare reading of the above clause (a) provides that the term "business" includes any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity whether or not it is for pecuniary benefits. Also, as per clause (b) any activity ancillary or incidental to the activities covered under clause (a) are also treated as business. Further, clause (c) also states that any activity or transaction falling in the above categories would be business whether or not there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the business of the manufacturing and selling of automotive components and providing canteen facilities to its employees is not the business of the Applicant. The canteen facility is provided by a third-party service provider for which the third party is raising an invoice to the Applicant and charging GST on the same. Therefore, the canteen services are being provided by the third-party service provider only. The Applicant is merely acting as a conduit to provide the canteen facility. 2.1.10 Therefore, it is submitted that Applicant is not in the business of providing catering facility. Further, providing / non-providing such canteen facility will not affect the business of Applicant in any way. Hence, the canteen facility cannot be said to be a business activity of the Applicant and hence, the provision of canteen facility to the employees cannot qualify as supply. 2.1.11 The Applicant also submits that the business of manufacturing, cooking, packing, supplying food items is strictly regulated in India under the Food Safety and Standard Act, 2006 ("FSSAI Act"), The Applicant is acting as a facilitator in the transaction between the third-party contractor and employees. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be restricted to cover only commercial activities. Any activity which is towards providing any support or service such as helping, aiding or assisting own employees cannot be treated at par with business. In the given case in hand, the provision of canteen facility is merely a support function extended by the Applicant to the employees. Hence, the said activity cannot be equated with business. 2.1.16 In this regard, reliance can be placed in the case of State of Gujarat vs. Raipur Manufacturing Co. Ltd. (Civil Appeal No. 603 of 1966) wherein the Petitioner was engaged in the business of manufacturing and selling cotton textiles. The Petitioner purchased coal for usage in business of cotton textiles. The said coal was later sold by the Petitioner. The Supreme Court held that the Petitioner was not engaged in the business of coal. The operative part of the judgement is extracted below: "8. Il is clear from these cases that to attribute an intention to carry on business of selling goods it is not sufficient that the assessee was carrying on business in some commodity and he disposes of for a price articles discarded, surplus or unserviceable. It was urged, however, on behal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r use in that business will not justify an inference that a business of selling that commodity was intended, unless there are circumstances existing at the time when the commodity was purchased or which have come into existence later which establish such an intention. It may be pointed out that the burden of proving that the Company was carrying on business of selling coal lay upon the Sales-tax authorities and if they made no investigation and have come to the conclusion merely because of the frequency and the volume of the sales, the inference cannot be sustained." ... Emphasis Supplied 2.1.17 It is also submitted that as per clause (b) of Section 2 (17), business also includes any activity which is in connection with or incidental or ancillary to the activities covered under clause (a) of Section 2 (17) of the CGST Act. Hence, one may question as to whether the provision of canteen facility can be said to be in connection with or incidental or ancillary to the principle business of automotive components. 2.1.18 In this regard, the Applicant submits that the connected activities or incidental or ancillary activities cannot be construed to include all activities carried out by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reference to the carrying on of business in fair price shop. What appears to be probable is that the assessee in order to provide amenity to its workmen has opened the fair price shop so that commodities may be made available to them at fair price. It may be that in fact profit accrues. But that is not what is material. The question is whether the assessee meant to run the fair price shop as a trade or commerce or a commercial activity. We do not find it possible to say that the fair price shop is a commercial activity of the assessee. We hold that the assessee is not carrying on the business of selling commodities in the fair price shop in a trade or commercial sense, and that, therefore, it is not with reference to the fair price shop a dealer within the meaning of the Act." ... Emphasis Supplied 2.1.21 In the case of Panacea Biotech Limited vs. Commissioner of Trade and Taxes [(2013) 59 VST 524 (Del.)] the issue was related to whether the selling of used cars is ancillary or incidental to the pharmaceutical business of the assessee. The Hon'ble Delhi High Court held that: "11. In the present case, the main business of the petitioner is manufacture and sale of pharmaceutical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 2.2.2 Section 7 (2) begins with a non-obstante clause and overrides Section 7 (1) of the CGST Act. A plain reading of above section provides that even in case where any activity may be treated as 'supply' in terms of Section 7 (1), certain activities/ transactions would still be excluded from the scope of 'supply'. 2.2.3 Entry (1) of Schedule-III covers services provided by employee to its employer in the course of employment or in relation to employment. It can be noted that the any activity or transaction which is undertaken in the course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntractual agreement entered into between the employer and the employee, will not be subjected to GST. Further, the Input Tax Credit (ITC) Scheme under GST does not allow ITC of membership of a club, health and fitness centre [section 17 (5) (b) (ii)]. It follows, therefore, that if such services are provided free of charge to all the employees by the employer then the same will not be subjected to GST, provided appropriate GST was paid when procured by the employer. The same would hold true for free housing to the employees when the same is provided in terms of the contract between the employer and employee and is part and parcel of the cost-to-company (C2C)". ... Emphasis Supplied, 2.2.9 Basis the above press release, it is clear that any services provided by the employer to the employees in terms of the contractual agreement entered into between the employer and employee will not be subjected to the GST. As mentioned above, the Applicant in the present case is providing canteen facility to its employees as per the Canteen Policy. Further, the amount charged by the Applicant is fully paid to the third-party contractor and no profit or pecuniary benefit is involved in this activ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period of 3 years. The mediclaim insurance policy is made from "The Oriental Insurance Company Ltd". Further we find from the sample copy of insurance policy submitted before us by the applicant that the applicant Initially pays the entire premium along with taxes and then recovers 50% of the premium through salary in one installment in case of staff and in three installments in case of operators as the case may be. The Applicant is not in the business of providing insurance coverage. Secondly, to provide parental insurance cover, is not a mandatory requirement under any law for the time being in force and therefore, non-providing parental insurance coverage would not affect its business by any means. Therefore, activity of recovery of 50% of the cost of insurance premium cannot be treated as an activity done in the course of business or for the furtherance of business. (4) We have referred to the term "Supply" described under Section 7 and the term "Business" defined in Section 2 (17) of the CGST Act, 2017, which are reproduced in applicant's contention above. From the reading of the above definition and section (supra), we find that the activity undertaken by the applicant lik ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s cannot be supply of services under the GST laws. In fact what is happening in this case is that since the applicant is recovering 50% of the premium paid on mediclaim from their employees, they want to treat the same as rendering of insurance output service to their employees and therefore they are contending that they are entitled to 100% input tax credit on the insurance premium paid to the insurance company in terms of Section 17 (5) (b) (iii) of the CGST Act, 2017, mentioned above. They have already submitted that they are primarily engaged in distribution of steel coils and also perform low value-added processing function in respect of some of the traded goods based on customer's requirements. The applicant has brought nothing on records to show that they are an Insurance Company and registered with such authorities. Hence it appears that the applicant is creating this fiction of providing health insurance to their employees only to avail 100% ITC of payments made to the insurance companies. Hence we find that they are not rendering any services of health insurance to their employees and hence there is no supply of services in the instant case. Since there is no supply, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r a supply of services As per clause 1 of the said Schedule-III, Services by an employee to the employer in the course of or in relation to his employment shall he treated neither as a supply of goods nor a supply of services. 5.3.4 Since the applicant is not supplying any services to its employees, in view of Schedule III mentioned above, we are of the opinion that GST is not applicable on the nominal amounts recovered by Applicants from their employees in the subject case." ... Emphasis supplied 2.3.5 The understanding of the Applicant is supported by the aforesaid rulings that the Applicant is not involved in the business of providing canteen facility. The Applicant has no intention to carry out the canteen business and the Applicant is only a facilitator in the transaction between the employee and the third-party canteen service provider. Therefore, in light of the above case laws, the Applicant submits that the canteen recovery from its employees would not amount to supply. 2.3.6 Hence, the Applicant submits that the provision of canteen facility by the Applicant to its employees through the third-party service providers cannot be said to be canteen services provided by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able 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 2.4.5 In the present case, the Applicant is providing canteen facility to the employees at the Chakan and Satara Unit. It is submitted that as per Section 46 of the Factories Act, 1948, every factory is mandatorily required to provide and maintain canteen in the factory in which more than 250 workers are employed. Therefore, in order to comply with the said mandatory condition, the Applicant is providing and maintaining the canteen at the factory. 2.4.6 Further, reliance can also be placed on advance ruling in the case of M/s. Tata Motors Ltd. (supra), wherein the authority while dealing with the similar issue has expressly held that the Applicant can claim the ITC t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Bus Transportation facility provided to the employees. Therefore, it is submitted that the Applicant is not engaged in the business of bus transportation and accordingly, the said facility provided by the Applicant to its employees does not amount to supply under the GST regulations. 2.5.2 Without prejudice to the above, the bus transportation facility provided by Applicant is excluded from the scope of supply in terms of Clause (a) of Section 7 (2) of the CGST Act. * The Applicant submits that the submission made by the Applicant in respect of canteen recovery in Ground-3.2 equally applies so far as the bus transportation is concerned. Therefore, it is humbly submitted that the bus transportation facility is specifically excluded from the purview of 'supply' in terms of Section 7 (2) (a) read with Schedule-III to the CGST Act. 2.5.3 Without prejudice to the above, it is settled position under GST regime that employee recoveries does not amount to 'supply'. * The Applicant submits that the submission made by the Applicant in respect of canteen recovery in Ground-3.3 equally applies so far as the bus transportation is concerned. Therefore, it is humbly submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ployee to the employer in the course of or in relation to his employment shall he treated neither as a supply of goods nor a supply of services. 5.3.4 Since the applicant is not supplying any services to its employees, in view of Schedule III mentioned above, we are of the opinion that GST is not applicable on the nominal amounts recovered by Applicants from their employees in the subject case." ... Emphasis supplied * In view of the above, it is submitted that there should not be any GST implications on the recoveries made from the employees for providing the bus transportation facility as a part of employment contract. 2.6 Applicant's Interpretation with respect to the applicability of exemption from GST in respect of provision of Non-AC bus transportation facility to its employees. 2.6.1 The Applicant reiterates that the bus transportation facility provided by the Applicant to its employees are undertaken via Non-Air-conditioned (Non-AC) buses. 2.6.2 The Applicant submits that the transportation of employees by the Applicant through usage of Non-AC buses would merit classification under the Tariff 9964 as "Passenger Transportation Services". It is submitted that the Ann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nipur, Meghalaya, Mizoram, Nagaland, Sikkim, or Tripura or at Bagdogra located in West Bengal; (b) non-airconditioned contract carriage other than radio taxi, for transportation of passengers, excluding tourism, conducted tour, charter or hire; or (c) stage carriage other than air-conditioned stage carriage. Nil Nil 2.6.6 From the above table, it is clear that, passenger transportation services via non airconditioned contract carriage, other than radio taxi is used for transportation of passenger is exempted from GST. The Applicant submits that the buses engaged in the transportation of employees are Non-AC buses. It is further submitted that the buses involved in the given case on hand is not a radio-taxi. The Applicant also submits that the buses engaged by Applicant in the given case are registered as 'contract carriage'. 2.6.7 In view of the above discussion, the services of transportation of the employees of the Applicant through Non-AC buses would be treated as passenger transportation service classified under Tariff 9964. Further, as per SI. No. 15 (b) of the Exemption Notification, the Non-AC buses being a Non-AC contract carriage would be covered under the exempt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he present case, the bus has the approved capacity of more than thirteen passengers. Since the bus transportation provided by the Applicant to its employees is clearly intended to be used in furtherance of business, therefore, ITC in respect of GST paid on the cost borne by the Applicant in lieu of transportation facility will be available. Further, the same would not be barred under Section 17 (5) (b) read with Section 17 (5) (a) of CGST Act, as the renting or hiring of motor vehicles used for providing the transportation facility are having the approved capacity of more than thirteen person. 2.7.5 Further, reliance can also be placed on advance ruling in the case of M/s. Tata Motors Ltd. (supra), wherein the authority while dealing with the similar issue has expressly held that the Applicant can claim the ITC to the extent of cost borne by the Applicant. Relevant extract of the ruling is reproduced below: "5.2.7. Therefore in the subject case, since the applicant has specifically submitted and as agreed by the jurisdictional officer, that they are using motor vehicles having approved seating capacity of more than thirteen persons (including the driver), the applicant shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill not be subjected to GST, provided appropriate GST was paid when procured by the employer. The same would hold true for free housing to the employees, when the same is provided in terms of the contract between the employer and employee and is part and parcel of the cost-to-company (C2C)". ... Emphasis Supplied 2.8.3 Based on the above understanding, it is submitted that, in case, a certain pre-decided amount of recoveries are made by the employer for providing certain facilities to its employees and rest of the non-recovered amount is treated as cost to the company, the GST will be applicable only on the recoveries made and not on the full amount charged by the supplier for providing the facility the employee. Conclusion: In view of the above submission, in the present case: * The canteen facility provided by the Applicant to its employees would not amount to 'supply' under GST; * The bus transportation facility provided by the Applicant to its employees would not amount to 'supply' under GST; * Without prejudice to above, even in case where bus transportation facility amount to supply of service, the same would be exempted under GST. * Without prejudice to the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Authority or the Appellate Authority to an Applicant on matters or on questions specified in sub-section (2) of section 97 or sub-section (1) of section 100, in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the Applicant;" "Section 97. Application for advance ruling: (2) The question on which the advance ruling is sought under this Act, shall be in respect of, -- (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 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." 3.3.5 From the above-mentioned provisions on advance ruling, it can be inferred that the Applicant is eligible to seek advance ruling in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices or both, whether by sale, transfer, barter, exchange, license, rental, lease or disposal or any other mode, made or agreed to be made by such person in the course or furtherance of business". The term "business" is defined in Section 2 (17) of the CGST Act, which reads like this: "Business" includes: (a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other sintilar activity, whether or not it is for a pecuniary benefit: (b) any activity or transaction in connection with or incidents or ancillary to sub-clause (a); ... 3.8.1 From the plane reading of the definition of "business", it can be safely concluded that the supply of food by the applicant to its employees would come under clause (b) of Section 2 (17) as a transaction incidental or ancillary to the main business. Schedule Il to the CGST Act, 2017 describes the activities to be treated as supply of goods or supply of services. As per clause 6 of the Schedule, the following composite supply is declared as supply of service: "supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me during the year' was exempted from service tax. But, there is no similar provision under the GST laws. 3.10. The Kerala AAAR in the matter of Caltech Polymers (P.) Ltd. held that the provision of food items to the employees for a consideration in a canteen run by company would come under definition of 'outward supply' and hence, shall be taxable as supply of service under GST. 3.11. The Haryana AAR in Musashi Auto Parts Put. Ltd. even when the third-party canteen service provider was involved, held that supply of coupons (for purchasing food) by employer to employees at 25% of the cost of food were taxable. The AAR was of the view that Schedule III of the CGST Act, 2017 only provides that services of employees to the employer were excluded from the purview of GST and not vice-versa. 3.12. Similarly, the Tamil Nadu AAR in Mfar Hotels & Resorts Pot. Ltd. Discussed the GST liability for food supplied via canteen to their employees on a free-of-cost basis as part of the employment contract. The AAR held that supply of free food to the employees was supply of service as per paragraph 2 to Schedule I of the CGST Act and was in the course or in furtherance of business as it was a pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance etc. However, at the same time, the Appellant is also recovering certain amounts from its employees at subsidized rates for providing the transportation services to its employees. The bus transportation service provider is raising its invoices on the Applicant. 3.15.1 The buses involved in the transportation of employees are Non-Air-conditioned (Non-AC) buses and having contract carriage permit. Further, the approved capacity of the bus is more than thirteen passengers. The bus transportation facility is provided by the Applicant to the employees without any profit motive. They are provided at subsidized amount and forms part and parcel of the employment arrangement. 3.15.2 Therefore, the services of transportation of the employees of the Applicant through Non-AC buses would be treated as passenger transportation service classified under Tariff 9964. Further, as per SI. No. 15 (b) of the Exemption Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, the Non-AC buses being a Non-AC contract carriage would be covered under the exemption from GST. The relevant part is reproduced below: Sl.No. Chapter, Section, Heading, Group or Service Code (Tariff) Description of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e recoveries, what would be the value on which GST is payable? 3.19. The issue has already been settled by the Hon'ble High Court of Bombay in the case of CCE Nagpur Vs. Ultratech Cement Ltd., 2010 (260) ELT 369 (Bom.) wherein the Hon'ble High Court has held that although the assessee is entitled for input service credit for the manufacturing of final product but the amount reimbursed by the employees by way of contribution is not entitled for input service credit. 04. HEARING Preliminary e-hearing was held on 21.12.2021. The Authorized representative of the applicant, Mr. Sandeep Sachdeva, Advocate, authorized of the applicant was Appeared, and requested for admission of the application. Jurisdictional Officer was not available. Final e-hearing was held on 18.12.2024. The Authorized representative of the applicant, Mr. Shankar Rochlani, C.A., and Mr. Harishchander Yadav, Assistant Commissioner of CGST, Division-IV, has virtually attended the meeting. We heard both the sides. 05. OBSERVATIONS AND FINDINGS: 5.1 Taxation of recovery of canteen services and transportation services made from employees. 5.1.1 We have carefully considered all the material on record and the relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery of amounts from employees for canteen services or transportation services to employees do not fall under 'supply 'as per section 7 of CGST Act, as supply of these services are not in the course or furtherance of "business'. Further, they have also taken a view that any services provided by the employer to the employees in terms of the contractual agreement entered into between the employer and employee will not be subjected to the GST. (6) Various grounds raised by the Applicant to contend that the recovery of amounts from the employees for providing canteen and transportation services are discussed as below. 5.1.2 Whether supply of canteen and transportation services provided to employees is in the course or furtherance of business. (1) We observe that the Applicant has argued that he is in the business of manufacture and supply of seats for motor vehicles and supply of canteen or transportation services is not his business. The Applicant has taken view that supply of 'canteen services' or 'transportation services' cannot be regarded as 'in the course or furtherance of business'. CGST Act, 2017 defines the expression 'business' under section 2 (17) of the CGST Act, 2017. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... something else but not as important. Cambridge Dictionary: providing support or help. Dictionary.com - supporting, secondary, subsidiary The reading of all above definitions clarify that any activity, which supports the main activity or necessary to carry out the principal activity, is an activity or transaction in connection with or incidental to or ancillary to the principal activity. The activity of providing food in canteen and transportation services to its workers who are pivotal to his principal activity can definitely be said to be in connection with or incidental or ancillary to his main activity of manufacture and supply off seats for motor vehicles. (3) Further, in terms of Section 2 (17) (c), as mentioned in para (1) above, the volume of transaction is immaterial for the purpose of coverage under "Business", therefore, even if supply of food is quite insignificant activity in terms of volume of transaction, still in terms of clause (c) of the aforesaid section, the activity of supply of canteen and transportation services, falls within the definition of "business". (4) Thus, as discussed above, the activity of supply of canteen services and transportation servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hence, the criteria of 'business', 'consideration' are met in the transaction of supply of these services by Applicant to the employees. Thus, there is supply of canteen services and transportation services from the Applicant to the employees, u/s. 7 (1) of CGST Act, 2017. 5.1.4 Taxability of Supply of Canteen services and transportation services to the employees (1) Another contention of the Applicant is that the perquisites forming part of employment contract excluded from GST. As per the Circular no. 172/04/2022-GST dated 06.07.2022 of CBIC, the relevant extract of the said circular is reproduced hereunder for ease of reference: S.No. Issue Clarification 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 supple 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 perquisit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and not the remaining portion/value that has been charged by the employer. Applying the said analogy to the instant case, in respect of the canteen and transportation services provided by the applicant to its employees, it becomes clear that the exemption provided in Entry 1 of Schedule Ill to the CGST Act, 2017 applies only to the concession part extended to the employees and not on the value charged to the employees. Thus, the recoveries made from the employees for canteen and transportation services are liable to levy of tax. 5.1.5 The Applicant has presented following arguments in support of his stand (1) The Applicant relies on the case of Deputy Commissioner of Commercial Taxes vs. Thirumagal Milis Ltd. [1967 (20) STC 287 Mad]. M/s Thirumagal Mills Ltd. is a spinning mill manufacturing cotton yarn. The issue relates to taxation of a fair price shop run by the assessee for the benefit of its employees. This case pertains to the interpretation of provisions of the Madras General Sales Tax Act, 1959. Under the said Act, liability to pay tax was upon the 'dealer'. The Tribunal held that the assessee is not a dealer in respect of the turnover related to fair price shop. Hon'bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AAR dated 05.05.2023 in case of M/s Kothari Sugars and Chemicals Limited and Tamil Nadu AAR dated 20.12.2023 in case of M/s Faiveley Transport Rail Technologies India Private Limited. (3) If incidental of ancillary supply of goods or services such as canteen or transportation services by the employer to employee were to not fall under 'business', it would not be necessary to provide respite to 'supplies by employer to employees given as perquisite' from falling under 'supply' by taking recourse to schedule III. That is, if a transaction or activity is not a supply u/s 7 (1) of CGST Act, then there would not be necessity to place such a transaction u/s 7 (2) (a) for deeming it to be neither supply of goods nor supply of services. Hence, as discussed in Para 5.1.2 and 5.1.3, Applicant's activity of supply of canteen and transportation services falls u/s 7 (1) of CGST Act, 2017. As discussed in Para 5.1.4, only the perquisites i.e., free supplies, in terms of a contractual agreement between the employer and employee are not to be subjected to GST as these are in lieu of the services provided by employee to the employer in relation to his employment. Hence, the recoveries made from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a passenger or passengers for hire or reward and is engaged under a contract, whether expressed or implied, for the use of such vehicle as a whole for the carriage of passengers mentioned therein and entered into by a person with a holder of a permit in relation to such vehicle or any person authorised by him in this behalf on a fixed or an agreed rate or sum- (a) on a time basis, whether or not with reference to any route or distance; or (b) from one point to another; and in either case, without stopping to pick up or set down passengers not included in the contract anywhere during the journey, and includes- (i) a maxicab; and (ii) a motor-cab notwithstanding that separate fares are charged for its passengers;" As per the above definition, Regional Transport Authority imposes certain conditions on the contract carriage permit holder for carrying contract carriage. Section 74 of the Motor Vehicles Act, 1988 which is relevant the contract carriage is produced as below. 74. Grant of contract carriage permit. - (1) Subject to the provisions of sub-section (3), a Regional Transport Authority may, on an application made to it under section 73, grant a contract carriage per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s per the conditions imposed in section 74 of the Motor Vehicles Act, 1988. In this case, the applicant is not the contract carriage permit holder and thus not bound by the conditions mentioned in the section 74 of the Motor Vehicles Act, 1988. As per the above definition of contract carriage, the passenger or passengers for hire or reward are to be engaged under a contract with them by a person with a holder of a permit of contract carriage. In this case, holder of a permit does not have any privity of contract with the passengers i.e. employees of the Applicant. Applicant has rented the buses from M/s. Sachin Travels. This transaction is in the nature of rent-a-cab service. M/s. Sachin Travels is charging his services of providing transport buses for carrying the employees @12% (6% SGST and 6% CGST). These invoices are raised to M/s. Spicer India Private Limited. These services are in the nature of renting of services of transport vehicles with operators. Here, the transport service provider provides buses to M/s. Spicer India Private Limited and charges them on monthly basis based on fixed amount plus additional charges based on the Km running of the bus. Additionally, 12% GST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is seen that ITC on leasing, renting or hiring of motor vehicles for transportation of passengers having approved seating capacity of more than 13 persons is not blocked u/s 17 (5) (b)(i). 5.3.3 The transportation of employees by picking them from their residence to the factory or office premises is merely for personal convenience of the employees to enable them to reach the premises of the office so as to participate in the business activity. 5.3.4 Hon'ble High court of Bombay in Solar Industries India Limited Vs Commissioner, Central Excise, Customs and Service Tax held that Cenvat Credit is not eligible on facility of transportation provided by the appellant to its employees as same was merely in the nature of service for personal use or consumption of its employees. The substantial question of law involved in the said judgement is: 1. Whether the services provided by a Manufacturer of transportation of its employees, from their designated pick up points to their workplace, by Bus, would amount to a service for personal use or consumption of any of the employees?" 2. Whether the activity of providing bus transport services to its employees, at the cost of the Manufacture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sportation of employees from residence to factory or office premises. The services of leased or hired motor vehicles are consumed for discharging obligation towards employees. 5.4.7 Section 17 (5) (g) of CGST/MGST Act 2017 states that input tax credit shall not be available in respect of goods or services or both used for personal consumption. Provision of service of transportation of employees from residence to factory or office premises has been used for personal consumption or comfort of employees. The applicant is not under any statutory obligation to provide these services to his employees and the services provided comes under category of personal consumption which "makes the applicant ineligible to avail input tax credit on the invoices issued to him by the transporter for transportation of employees as per Section 17 (5) (g) of CGST/MGST Act 2017. 5.5 Value in respect of which canteen and transportation services are taxable As explained in above paras, supply of canteen services and transportation services to the employees would in normal course constitute to be the supply of services u/s 7 (1) of GST Act 2017. However, it is now clarified by the CBIC circular No. 172/04/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ates that, notwithstanding anything in sub-section (1), activities or transactions specified in Schedule III shall be treated neither as a supply of goods nor a supply of services. Serial Number 1 of Schedule III is as below. "1. Services by an employee to the employer in the course of or in relation to his employment." This entry includes only the services by an employee to the employer. However, it has been clarified by the above referred Circular that 'as corollary to this provision, the perquisite given to the employees in view of the contractual agreement are in lieu of services given by the employee to the employer and should not be subjected to GST'. As the supply of perquisite by the employer to the employee would not have respite from above two aspects mentioned at Sr. No. 1 and 2 above as the said supply is neither exempted nor a Non-GST supply, it would be appropriate to interpret that the perquisite given to the employees in view of the contractual agreement are in lieu of services given by the employee to the employer and would not be subjected to GST by deeming it to be part of Schedule III as a corollary to entry at Sr. No. 1 of Schedule III for cohesive interpret ..... 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