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2022 (9) TMI 200 - AAR - GSTLevy of GST - canteen services / catering services - amount recovered by the company, from employees or contractual workers - provision of third-party canteen service is obligatory under section 46 of the Factories Act, 1948 - input tax credit of GST paid on food bill of the Canteen Service Provider - HELD THAT - These activities provided by M/s Troikaa to its employees to be an activity made in the course or furtherance of business to deem it a Supply by M/s Troikaa to its employees in view of the above clarification and therefore amount collected by M/s Troikaa from employees towards canteen charges in terms of the contractual agreement in lieu of providing canteen service i.e. food is not liable to GST. A person is deemed to have been employed as contract labour when he is hired in, or in connection with a particular work of the principal employer. Where a person is 'hired' specifically for the work of an establishment, his scope of work does not extend beyond the work of that establishment and he is considered to be a contract labour - The term 'employed' is not defined under the GST, therefore, we refer to the dictionary meaning. The Law Lexicon says that the word 'employed' means engaged or occupied in the performance of work or hired to perform labour. Security Firm/ Contractor pays the salary to the contractual worker i.e. Security personal. Theses contractual worker are supplied by the contractor to M/s Troika for carrying out activity in the premises. M/s Troika has paid gross amount for the moth to the labour contractor for supply of labours at factory premises. The gross amount includes allowances, leave encashment and Provident Fund. This shows that M/s Troika paid gross amount to the labour contractor and labour contractor being employer paid the wages per month to the workers being employees and also deduct Provident Fund - therefore, it is evident that the instant case does not pass the test of employer-employee relationship and is therefore does not fall under the ambit of entry I of Schedule III of CGST Act. 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 subsidized cost through third-party-vendor. The supply of food by the applicant is 'Supply of Service' by the applicant to their contractual worker/s. The cost, which is recovered from the salary of contractual worker, as deferred payment is 'consideration' for the supply and GST is liable to be paid - the recovery of amount from contractual worker on account of third party canteen services provided by M/s Troika would come under the definition of 'outward supply' as defined in Section 2(83) of the CGST Act, 2017 and therefore, liable to tax as a supply under GST. ITC on canteen charges on the food supplied to employees of the applicant company - HELD THAT - The proviso of Section 17 (5)(b) stipulates that ITC shall be available on the GST paid where it is obligatory to provide a benefit for an employer to its employees in terms of any law for the time being in force - ITC of the GST paid on canteen charges is available to the applicant on the food supplied to the employees of the applicant company as such under Section 46 of the Factories Act, it is mandatory to provide canteen facility to the employees. ITC on canteen charges on the food supplied to contractual worker - HELD THAT - In the instant case the applicant company and contractual worker do not cover under the category of employer-employee relationship and also it is not obligatory on the applicant company to provide canteen facility to the Contractual worker as per the provisions of CLRA Act. Section 17 (5) allows ITC on food, beverages and outdoor catering only in case it is obligatory under any law for the time being in force. Thus applicant is not eligible of ITC on the food supplied by canteen service provider to contractual worker and is blocked under Section 17(5) (b) of CGST Act 2017 - the applicant company is not eligible to the ITC on food supplied to the contractual worker under Section 17 (5) (b) of CGST Act 2017.
Issues Involved:
1. Applicability of GST on the amount recovered by the company from employees for canteen services. 2. Applicability of GST on the amount recovered by the company from contractual workers for canteen services. 3. Availability of Input Tax Credit (ITC) on GST paid on canteen services provided to employees. 4. Availability of ITC on GST paid on canteen services provided to contractual workers. Detailed Analysis: 1. Applicability of GST on the amount recovered by the company from employees for canteen services: M/s Troikaa Pharmaceuticals Limited provides canteen facilities to its employees as mandated by Section 46 of the Factories Act, 1948. The company recovers 50% of the food cost from employees and pays the full invoice to the canteen service provider. The company argued that the recovery of canteen charges from employees does not constitute "supply" under Section 7 of the CGST Act, 2017, as it is not in the course or furtherance of business. The Authority for Advance Ruling (AAR) referred to CBIC Circular No. 172/04/2022-GST dated 6-7-22, which clarified that perquisites provided by the employer to employees in terms of contractual agreements are not subject to GST. Consequently, the AAR ruled that the amount collected from employees towards canteen charges is not liable to GST. 2. Applicability of GST on the amount recovered by the company from contractual workers for canteen services: M/s Troikaa also provides subsidized food to contractual workers, recovering 50% of the food cost from them. These workers are not on the company's payroll but are employed through contractors. The AAR noted that contractual workers do not fall under the definition of "employees" as per the Factories Act, 1948. The AAR concluded that the supply of food to contractual workers constitutes "outward supply" as defined in Section 2(83) of the CGST Act, 2017, and is therefore liable to GST. The contractual workers do not have an employer-employee relationship with the company, and the recovery from them is considered a consideration for the supply of services. 3. Availability of ITC on GST paid on canteen services provided to employees: The AAR examined Section 17(5)(b) of the CGST Act, 2017, which restricts ITC on food and beverages unless it is obligatory for an employer to provide such services under any law. Since providing canteen facilities is mandatory under Section 46 of the Factories Act, 1948, the AAR ruled that ITC on GST paid on canteen services provided to employees is admissible, provided the burden of GST is not passed on to the employees. 4. Availability of ITC on GST paid on canteen services provided to contractual workers: The AAR referred to the Contract Labour (Regulation and Abolition) Act, 1970, which mandates that contractors, not the principal employer, provide canteen facilities to contract labor. Since the company is not obligated to provide canteen services to contractual workers under any law, the AAR ruled that ITC on GST paid on canteen services provided to contractual workers is not admissible and is blocked under Section 17(5)(b) of the CGST Act, 2017. Ruling: 1. GST is not leviable on the amount representing the employees' portion of canteen charges, which is collected by M/s Troikaa and paid to the canteen service provider. 2. GST is leviable on the amount representing the contractual workers' portion of canteen charges, which is collected by M/s Troikaa and paid to the canteen service provider. 3. ITC on GST paid on canteen facilities is admissible to M/s Troikaa under Section 17(5)(b) of the CGST Act on the food supplied to employees, subject to the condition that the burden of GST has not been passed on to the employees. 4. ITC on GST paid on canteen facilities is not admissible to M/s Troikaa under Section 17(5)(b) of the CGST Act on the food supplied to contractual workers supplied by labor contractors.
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