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2021 (12) TMI 320 - AAR - GSTLevy of GST - payment of notice pay by an employee to the applicant-employer in lieu of notice period under clause 5(e) of II of GST Act - amount of premium of Group Medical Insurance Policy recovered at actuals from non-dependent parents of employees, and retired employees those who are covered under the said Policy - recovery of nominal amount for availing the facility of Canteen at the Refinery at Bina when it is not a supply as per clause I of Schedule III of GST Act - recovery of telephone charges from the etitployees over and above the fixed rental charges payable to BSNL - whether full ITC is available to the applicant or ITC will be restricted to the extent of GST borne by the applicant-employer? - provision of canteen services to all the employees without charging any amount (free of cost) will fall under para 1 of Schedule III of GST Act and will nut he subjected to GST? - whether in view of the explanation to Section 17(3) of GST Act, ITC shall be available to the applicant on the goods and services used in the activity of provision of free canteen services to the employees? Levy of GST on payment of notice pay by an employee to the applicant - HELD THAT - It is important to note that except due to exclusion by Para 1 of Schedule III, the services by an employee to an employer are also covered in supply, otherwise there should have been no need for such exclusion. lt is also important to note that Schedules are part of the GST Act. The Schedules contain specific provisions/exclusions, and therefore, they prevail over other general provisions of the GST Act - Section 7(1) is defining supply in an inclusive manner. Therefore, there can be other activities also which can be covered in supply even if they may not be a supply as per provisions of Section 7. There can be no dispute about this fact that the applicant as employer is tolerating the act or situation whereby the employee is not giving the notice for the agreed period of 30 days before leaving the service of the applicant-company . Thus, by relieving an employee without notice period or by accepting a shorter notice period, the applicant is tolerating an act or a situation created by such action of the employee, and therefore, it is covered by Para 5(e) of Schedule II, and is a supply of service liable to tax. Premium of Group Medical Insurance Policy recovered from the non-dependent parents of employees retired employees at actuals - HELD THAT - As per applicant it is not covered by the scope of supply as defined u/s 7 of GST Act, as it is not in the course or furtherance of business of the applicant. It is also submitted by applicant that it is not covered by the definition of business as given in Section 2(17). However, both the contentions of the applicant are not valid - Had the services been provided by applicant as pure agent as per Rule 33 of GST Rules, then there would have been no liability to pay GST. But, the applicant has not provided the insurance service to the non-dependent parents of employees retired employees as an agent of the Insurance Company. Therefore, the premium of Group Medical Insurance Policy recovered by applicant from the non-dependent parents of employees retired employees will fall within the ambit of supply and is liable to GST. Applicability of GST on recovery of nominal amount for availing canteen facilities by the employees - HELD THAT - As per Section 15(1) of GST Act, the value of supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply where the supplier and the recipient of the supply are not related, and the price is the sole consideration for the supply. However, if the transactions are between related persons then value of supply is to be determined as per Rule 28. The employer and employee are related person as per Explanation to Section 15, and therefore, the valuation of canteen facility provided by applicant to its employees shall be as per Rule 28 and not at the nominal amount recovered by applicant from its employees. Applicability of GST on telephone charges recovered by applicant from its employees over and above the fixed rental charges payable by applicant to BSNL - HELD THAT - It is covered in the definition of business given in Section 2(17), as it is an activity or transaction in connection with or incidental or ancillary to the business of the applicant. Moreover, it is a supply as per inclusive definition of supply given under Section 7. Accordingly, the applicant-company is liable to pay GST on the amount recovered from its employees towards telephone charges at actuals. Availability of ITC to the applicant in respect of inputs and input services pertaining to supply - HELD THAT - The recovery of premium of Group Medical Insurance Policy from the non-dependent parents of employees retired employees at actuals is a supply of the said services by the applicant. It is an activity or transaction in connection with or incidental or ancillary to the main activity of the applicant, and therefore, it is covered in business as defined in Section 2(17) of GST Act - the transaction of supplying Group Medical Insurance services to the non-dependent parents of employees retired employees, and recovery of premium for the same, is a transaction which is in connection with or incidental or ancillary to the main business of the applicant, and therefore, the applicant shall be eligible to claim Input Tax Credit in respect of premium paid to insurance company to the extent of its further supply. Input tax credit in respect of Canteen services - HELD THAT - In respect of telephone charges paid to BSNL, the applicant shall be eligible to claim Input Tax Credit, because it is a further taxable supply by the applicant. The said transaction comes under clause (b) of Section 2(17) as a transaction incidental or ancillary to the main business of the applicant, and is liable to tax. Moreover, telephone charges are not covered by the provisions of Section 17 relating to blocked credit Therefore, the applicant is eligible for ITC in respect of such telephone charges. Levy of GST on canteen services provided to the employees without charging any amount (free of cost) - HELD THAT - The canteen services provided to the employees are to be treated as supply, even if there is no consideration. It will be liable to tax as per value determined in accordance with Rule 28. Eligibility for ITC in respect of canteen services provided by applicant to its employees without charging any amount (free of cost) - HELD THAT - The applicant shall not be eligible to claim Input Tax Credit in respect of canteen services in view of specific provision of clause (ii) of SI. No. 7 of Notification No. 11/2017-Central Tax (Rate), dt. 28.6.17, as substituted by Notification No. 20/2019-Central Tax (Rate), dt. 30.9.19, w.e.f. 10.10.19 read with clause (xxxii) of Paragraph 4 relating to explanation given in Notification No. 11/2017-Central Tax (Rate).
Issues Involved:
1. GST applicability on notice pay by an employee to the employer. 2. GST applicability on the premium of Group Medical Insurance Policy recovered from non-dependent parents of employees and retired employees. 3. GST applicability on recovery of nominal amounts for canteen facilities. 4. GST applicability on recovery of telephone charges from employees. 5. Availability of full Input Tax Credit (ITC) for the applicant concerning the above issues. 6. GST applicability on free canteen services provided to employees. 7. ITC availability for goods and services used in providing free canteen services. Detailed Analysis: Issue 1: GST on Notice Pay - Applicant's Argument: The payment of notice pay is covered under clause 1 of Schedule III, which is not a supply under GST. It should not be considered as a supply of service under clause 5(e) of Schedule II. - Authority's Decision: GST is applicable on payment of notice pay by an employee to the employer under clause 5(e) of Schedule II of the CGST Act. The act of tolerating the employee's early exit is considered a supply of service. Issue 2: GST on Group Medical Insurance Premium - Applicant's Argument: The recovery of insurance premiums from non-dependent parents of employees and retired employees is not in the course or furtherance of business and should not be taxable. - Authority's Decision: The premium recovered from non-dependent parents and retired employees falls within the ambit of supply and is liable to GST. The applicant is not acting as a pure agent of the insurance company. Issue 3: GST on Canteen Facilities - Applicant's Argument: Canteen services provided to employees are part of the employment contract and should be treated as services by an employee to the employer under clause 1 of Schedule III. - Authority's Decision: The recovery for canteen facilities falls within the definition of 'outward supply' and is liable to tax. The valuation should be as per Rule 28 since the employer and employee are related persons. Issue 4: GST on Telephone Charges - Applicant's Argument: The recovery of telephone charges from employees is not in the course or furtherance of business and should not be taxable. - Authority's Decision: The recovery of telephone charges from employees is a supply and is liable to GST. It is an activity incidental or ancillary to the business of the applicant. Issue 5: Availability of ITC - Applicant's Argument: Full ITC should be available for the inputs and input services related to the supplies mentioned in Issues 2, 3, and 4. - Authority's Decision: - Insurance Premium: ITC is available to the extent of further supply. - Canteen Services: ITC is not available due to specific provisions in the Notification No. 11/2017-Central Tax (Rate). - Telephone Charges: ITC is available as these charges are not covered by the provisions of Section 17 relating to blocked credit. Issue 6: GST on Free Canteen Services - Applicant's Argument: Free canteen services provided to employees should fall under para 1 of Schedule III and not be subject to GST. - Authority's Decision: Free canteen services are considered a supply and are liable to tax as per value determined in accordance with Rule 28. Issue 7: ITC for Free Canteen Services - Applicant's Argument: ITC should be available for goods and services used in providing free canteen services. - Authority's Decision: ITC is not available for canteen services as per specific provisions in Notification No. 11/2017-Central Tax (Rate). Ruling: 1. GST is applicable on notice pay under clause 5(e) of Schedule II of the CGST Act. 2. Premium recovered for Group Medical Insurance from non-dependent parents and retired employees is liable to GST. 3. Canteen facilities provided to employees are taxable, and valuation should follow Rule 28. 4. GST is applicable on telephone charges recovered from employees. 5. ITC is available for insurance premiums to the extent of further supply, not available for canteen services, and available for telephone charges. 6. Free canteen services are taxable and should be valued as per Rule 28. 7. ITC is not available for free canteen services as per specific provisions. Validity: The ruling is valid subject to the provisions under section 103 (2) until declared void under Section 104 (1) of the GST Act.
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