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2021 (8) TMI 735 - AAR - GSTInput tax credit - GST charged by service provider on canteen facility provided to employees working in factory - levy of GST - nominal amount recovered by Applicants from employees for usage of canteen facility - ITC to be restricted to the extent of cost borne by the Applicant (employer) or not - Section 17(5)( b) of CGST Act, 2017 - HELD THAT - Sub clause of Section 17(5)(b)(i) ends with colon and is followed by a proviso and this proviso ends with a semicolon - Colons and semicolons are two types of punctuation. Colons are used in sentences to show that something is following, like a quotation, example, or list. Semicolons are used to join two independent clauses/ subclauses , or two complete thoughts that could stand alone as complete sentences. That means they're to be used when you're dealing with two complete thoughts that could stand alone as a sentence. Section 17(5)(b)(i) sub-clause ending with a colon and followed by a provisio which ends with a semi colon is to be read as independent sub-clause, independent of sub clause Section 17(5)(b)(iii) and its proviso of subclause iii . Thereby, the provisio to section 17(5)(b)(iii) is not connected to the sub-clause of Section 17(5)(b)(i) and cannot be read into it. ITC on GST paid on canteen facility is blocked credit under Section 17 (5)(b)(i) of CGST Act and inadmissible to applicant - GST, at the hands on the applicant, is not leviable on the amount representing the employees portion of canteen charges, which is collected by the applicant and paid to the Canteen service provider.
Issues:
1. Availability of input tax credit (ITC) on GST charged by service provider on canteen facility for employees. 2. Applicability of GST on nominal amount recovered by employer from employees for canteen facility usage. 3. Restriction of ITC to the extent of cost borne by the employer. Issue 1: Availability of ITC on GST charged by service provider: The applicant maintained a canteen for employees as per the Factories Act, 1948. They argued that ITC should be available as per Section 17(5)(b) of the CGST Act, which allows for ITC where it is obligatory for an employer to provide such services to employees under the law. The Authority noted that the applicant collected the employees' portion of canteen charges and paid it to the service provider without retaining any profit margin. The Authority analyzed Section 17(5)(b)(i) and concluded that the ITC on GST paid on canteen facility is blocked credit under the CGST Act and is inadmissible to the applicant. Issue 2: Applicability of GST on nominal amount recovered from employees: The applicant recovered a nominal amount from employees for canteen facility usage, where a part of the charges was borne by the employer. The Authority found that the activity of collecting the employees' portion of canteen charges was without consideration, as the applicant did not retain any profit margin. Therefore, GST was not leviable on the amount representing the employees' portion of canteen charges collected by the employer and paid to the service provider. Issue 3: Restriction of ITC to the extent of cost borne by the employer: The applicant questioned if the ITC available should be restricted to the extent of the cost borne by the employer. The Authority's analysis of Section 17(5)(b)(i) clarified that the ITC on GST paid on canteen facility is not admissible to the applicant. They emphasized that the cited case law from the Service Tax era was not applicable to the present GST matter. Therefore, the ITC cannot be restricted to the cost borne by the employer as it is deemed blocked credit under the CGST Act. In conclusion, the Authority ruled that the applicant was not eligible for ITC on GST paid on the canteen facility and that GST was not applicable on the amount representing the employees' portion of canteen charges collected by the employer. The ruling clarified the inadmissibility of ITC under Section 17(5)(b)(i) of the CGST Act and highlighted the distinction between the employer and employee contributions towards the canteen charges in terms of GST applicability.
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