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2021 (12) TMI 999 - AAAR - GSTLevy of GST - payment of notice pay by an employee to the applicant employer in lieu of notice period, under clause 5(e) of Schedule II of CGST Act - amount of premium of Group Medical Insurance Policy of non-dependent parents recovered from the employees retired employees at actuals covered under the said Policy - recovery of nominal amount for availing the facility of Canteen at the Refinery at Bina when it is no supply as per clause 1 of Schedule III of CGST Act - recovery of telephone charges recovered from the employees over and above the fixed rental charges payable to BSNL - Canteen services to all the employees without charging any amount (Free of cost) will fall under para 1 of Schedule II of CGST Act. Whether GST is applicable on payment of notice pay by an employee to the applicant-employer in lieu of notice period under clause 5(e) of Schedule II of GST Act? - HELD THAT - Services by an employee to the employer in the course of or in relation to his employment have been placed out of the purview of GST. In present case also the said compensation which accrues to the employer is in relation to the services provided by the employee. Such compensation is related to the services not provided by him to the employer during the course of employment. In other words, the employer is being compensated for the employee's sudden exit. Merely because the employer is being compensated does not mean that any services have been provided by him or that he has 'tolerated' any act of the employee for premature exit - the Ld. AAR had erred in concluding that such activity was leviable to GST. Whether the amount of premium paid towards Group Medical Insurance policy of non-dependent parents recovered from employees and recoveries from retired employees who were covered under the policy is taxable under GST or not? - HELD THAT - Any activity done against consideration is treated as supply however, such an activity must be in the course of business or for the furtherance of business - the activity undertaken by the applicant like providing of mediclaim policy for the employees' non-dependent parents/ retired employees through insurance company neither satisfies conditions of Section 7 to be held as supply of service nor it is covered under the term business of Section 2(17) of CGST ACT 2017. Accordingly, facilitating medical insurance services to non dependent parents and retired employees upon recovery of premium amount on actuals cannot be considered as 'supply of service' under CGST Act or MPSGST Act. Whether GST is applicable on recovery of nominal amount for availing the facility of canteen at the Bina refinery? - HELD THAT - MPAAR has ruled that the Goods and Services Tax is applicable on the amount recovered from employees, mainly on the premises that 'the appellant is supplying food to its employees', which would be covered under the definition of the term 'business' under Section 2(17) of the Central Goods and Services Tax Act, 2017 and the Gujarat Goods and Services Tax Act, 2017. However, the appellant has asserted before us that it is collecting the portion of employees' share and paying to Canteen Service Provider, a third party, which is nothing but the facility provided to employees, without making any profit and working as mediator between employees and the contractor / Canteen Service Provider. Under these circumstances, we hold that the Goods and Services Tax is not applicable on the activity of collection of employees' portion of amount by the appellant, without making any supply of goods or service by the appellant to its employees. The Goods and Services Tax is not applicable on the collection, by the appellant, of employees' portion of amount towards foodstuff supplied by the third party / Canteen Service Provider. Whether GST is applicable on recovery of telephone charges from the employees over and above the fixed rental charges payable to BSNL? - HELD THAT - The activity undertaken by the applicant like providing of telephone facility to employees through BSNL neither satisfies conditions of Section 7 to be held as supply of service nor it is covered under the term business of Section 2(17) of CGST ACT 2017. Accordingly, facilitating telephone connection to employees upon recovery of usage charges on actuals cannot be considered as 'supply of service' under COST Act or MPSGST Act. Whether full ITC is applicable to the applicant or ITC will be restricted to the extent of GST borne by the applicant employer? - HELD THAT - Input credit of GST paid to BSNL on usage charges recovered from employees would not be available to the appellant as they are not providing any outward supply of telephone services and the facility is also not attributable to the purposes of their business in terms of Section 17(1) of the CGST Act - Input credit of GST paid to the insurance provider would also not be available to the applicant- as health insurance is in the excluded category under Section 17 (5) of the CGST Act and as said insurance services are not any outward supply of the applicant - As regards provision of canteen facility, It is found that the appellant has submitted that the canteen facility was required to be provided by a company as per Section 46 of the Factories Act, 1948. Therefore applying the proviso under Section 17(5)(b) 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, we are of the view that input credit of GST paid would be available to the appellant. Whether the 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 not be subjected to GST? - HELD THAT - Services by an employee to the employer in the course of or in relation to his employment have been placed out of the purview of GST. In this case canteen services are provided to employees by the employer. So this is not a case where some services have been provided by the employee to the employer. There is nothing on record to show that the said facility provided to employees is part of the wage structure - canteen services would not be leviable to GST at the hands of the employer because of findings that the employer was merely a facilitator between the canteen service provider and the employee and that the employer was mandated to run a canteen under the Factories Act.
Issues Involved:
1. Applicability of GST on payment of notice pay by an employee. 2. Applicability of GST on premium of Group Medical Insurance Policy recovered from non-dependent parents and retired employees. 3. Applicability of GST on recovery of nominal amount for availing the canteen facility. 4. Applicability of GST on recovery of telephone charges from employees. 5. Availability of Input Tax Credit (ITC) for the applicant in respect of questions II, III, and IV. 6. Provision of canteen services to employees without charging any amount and its GST implications. 7. Availability of ITC on goods and services used in the provision of free canteen services to employees. Detailed Analysis: Issue 1: GST on Payment of Notice Pay The appellate authority concluded that GST is not applicable on payment of notice pay by an employee to the employer in lieu of notice period. The authority referenced the Madras High Court decision in GE T&D India Ltd vs Deputy Commr of Central Excise, LTU, Chennai, which stated that the employer does not render any service by tolerating the employee’s premature exit. The authority emphasized that the compensation paid by the employee is related to the services provided by the employee during the course of employment, which is excluded from GST under Schedule III of the CGST Act. Issue 2: GST on Group Medical Insurance Premium The appellate authority found that GST is not applicable on the amount of premium paid towards Group Medical Insurance policy recovered from non-dependent parents and retired employees. The authority reasoned that the activity of recovering insurance premiums at actuals does not constitute a supply of service under Section 7 of the CGST Act. The appellant is not in the business of providing insurance services, and the recovery of costs is not in the course or furtherance of business. Issue 3: GST on Canteen Facility Recovery The appellate authority held that GST is not applicable on the recovery of nominal amounts for availing the canteen facility. The appellant provides the canteen facility as mandated by the Factories Act, 1948, and merely facilitates the supply of food to employees without making any profit. The appellant collects employees' share of the cost and pays it to the canteen service provider. Since the appellant does not supply any goods or services to employees and acts only as a mediator, the transaction does not involve a supply subject to GST. Issue 4: GST on Recovery of Telephone Charges The appellate authority concluded that GST is not applicable on the recovery of telephone charges from employees over and above the fixed rental charges payable to BSNL. The activity of providing telephone facilities to employees does not satisfy the conditions of Section 7 to be considered a supply of service, nor is it covered under the term "business" as defined in Section 2(17) of the CGST Act. Issue 5: Availability of ITC - Telephone Charges: ITC on GST paid to BSNL for telephone usage charges recovered from employees is not available, as the appellant does not provide any outward supply of telephone services, and the facility is not attributable to the purposes of their business. - Insurance Premium: ITC on GST paid to the insurance provider is not available, as health insurance is excluded under Section 17(5) of the CGST Act, and the insurance services are not an outward supply of the appellant. - Canteen Services: ITC on GST paid to the canteen service provider is available, as providing canteen facilities is obligatory under the Factories Act, 1948, and falls under the proviso of Section 17(5)(b) of the CGST Act. Issue 6: Provision of Free Canteen Services The appellate authority determined that the provision of canteen services to employees without charging any amount does not fall under Para 1 of Schedule III of the CGST Act. The canteen services are provided by the employer and are not part of the wage structure. However, GST is not applicable on the employer's activity of facilitating canteen services, as the employer acts as a mediator between the canteen service provider and the employees. Final Order: 1. GST is not applicable on payment of notice pay by an employee to the employer in lieu of notice period. 2. GST is not payable by the employer on the amount of premium paid towards Group Medical Insurance policy recovered from non-dependent parents and retired employees. 3. GST is not payable by the employer on recovery of nominal amounts for availing the canteen facility. 4. GST is not payable on recovery of telephone charges from employees over and above the fixed rental charges payable to BSNL. 5. ITC on GST paid to BSNL and the insurance provider is not available, but ITC on GST paid to the canteen service provider is available. 6. Provision of canteen services to employees without charging any amount does not fall under Para 1 of Schedule III of the CGST Act.
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