9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (6) TMI 1255 - AAR - GSTLevy of GST - recovery of nominal amount from the employees for making payment to the third-party service provider, providing food in canteen as mandated in the Factories Act, 1948 - HELD THAT - The applicant provides canteen facility in both the units and follows different modus in running the canteen facility at their units at Kattur and Sathamangalam. The common factor seen is that the applicant while extending the canteen facility, is providing meals/food at concessional rates, i.e., no meal is extended free and specified amount in respect of the food consumed by the employee are collected by the applicant against such consumption of food. Also it is seen that consuming food at the canteen facility made available by the applicant in their premises is not mandatory because the deductions sheet reveals that only a limited number of employees have consumed food at the canteens also the consumption is limited to certain items/breakfast/lunch, etc, while the number of workers and labourers employed at the units are at large. With the above facts, the question sought on the liability to pay GST on the amount collected by the employees is taken up. The contention that the activity of supply of food for a nominal charge by them is neither a supply of goods nor a supply of service is not legally tenable. The next contention of the applicant is that there is no supply between the Applicant and the employees and the Applicant is not engaged in the business of provision of canteen services but has established the canteen as required under the Factories Act - From the provisions of Section 46 of Factories Act 1948, it is seen that the Act mandates establishing a canteen when more than two hundred and fifty workers are ordinarily employed in a factory and as per sub- clause (2)(dd) above, certain expenditure are to be borne by the employer - In the case at hand, in both the units, abiding by the above provisions, since the number of workers and contract labourers ordinarily employes exceeds 250 in number, the applicant has established the canteen. Managing committee for the canteen are present in the units as seen from the agreement entered into with the third party vendor and the submissions of the applicant and the menu along with the cost are decided by the said committee. The cost to be borne by the applicant as per the above provisions are borne by the applicant and the employee cost are arrived. The supply made by a taxable person in the course or furtherance of business is an Outward supply . It has been brought out above, that establishing canteen is in the furtherance of business of the applicant and supply of food to the employees when the same is not contractually agreed, is not an allowance as a part of the employment. Thus, the provision of food in the canteen for a nominal cost is a Supply for the purposes of GST. Schedule II to the CGST Act, 2017 describes the activities to be treated as supply of goods or supply of services - the supply of food is a Supply of Service . Whether the amount received from the employees is in the nature of recovery and not consideration as the recovered amount is directly paid to the third-party vendor without any profit element in the hands of the Applicant? - HELD THAT - The running of canteen in the units of the applicant is in the course of furtherance of business. The applicant has chosen to run the canteen through a third party vendor in one of its units, while in other unit, the same is run by the applicant themselves. It is also clear that in running of such canteens, the employer, i.e., the applicant is mandated to bear certain costs. The contention that the applicant only collects the employee cost and pay the third party vendor that such employee cost is only a recovery is not acceptable. Provision of canteen facility and bearing certain costs in running of canteen are mandated on the part of the employer as per the Factories Act. Accordingly, such canteens are provided. It has been established that the supply of food in the canteens are Supply of Service by the applicant. In the case at hand, the applicant has established canteen facilities as mandated under Section 46 of the Factories Act, 1948 and supplies food at a nominal cost either directly or through third-party-vendor. The supply of food by the applicant is Supply of Service by the applicant to their employees as the same is not a part of the employment contract and the canteen facility is provided as mandated under Factories Act. The nominal cost, which is recovered from the salary as deferred payment is consideration for the supply and GST is liable to be paid.
Issues Involved:
1. Whether the recovery of a nominal amount from employees for canteen services provided by a third-party service provider, as mandated by the Factories Act, 1948, attracts GST. Detailed Analysis: Issue 1: GST Applicability on Nominal Amount Recovery for Canteen Services Applicant's Argument: The applicant, engaged in manufacturing, has set up canteen facilities at its units as mandated by the Factories Act, 1948. They recover a nominal amount from employees for meals, with the remaining cost borne by the employer. The applicant contends that: - The provision of food in the canteen is part of the employment contract and mandated by law, thus falling under Entry 1 of Schedule III of the CGST Act, 2017. - There is no supply between the applicant and the employees, and the amount received is a recovery, not consideration. - The canteen facility is not a business activity but a statutory obligation. Authority's Findings: 1. Nature of Supply: - The applicant provides canteen facilities at concessional rates, not free. The consumption of food is not mandatory, as evidenced by deduction sheets showing limited participation. - The supply of food in the canteen is not part of the employment contract but a statutory obligation under the Factories Act, 1948. Hence, it does not fall under Entry 1 of Schedule III of the CGST Act, 2017. 2. Business Activity: - Establishing a canteen is an activity incident to running the business, mandated by the Factories Act when more than 250 workers are employed. - The term "business" includes activities incidental to the main business. Therefore, running a canteen is in furtherance of the applicant's business. 3. Supply of Service: - The provision of food in the canteen for a nominal cost is a "Supply of Service" as defined under Schedule II of the CGST Act, 2017. - The supply of food for consideration, even if nominal, qualifies as an outward supply. 4. Consideration: - The amount recovered from employees constitutes "consideration" as defined in Section 2(31) of the CGST Act, 2017. - The recovery of cost from the salary as deferred payment does not alter the fact of service provided by the applicant. Conclusion: The supply of food by the applicant to its employees, either directly or through a third-party vendor, is a "Supply of Service." The nominal amount recovered from employees is "consideration" for this service, and GST is liable to be paid. Ruling: The recovery of a nominal amount from employees for making payment to a third-party service provider, providing food in the canteen as mandated in the Factories Act, 1948, attracts GST.
|
