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2023 (5) TMI 228 - AAR - GSTClassification of services - rate of GST - Reimbursement of bonus - same GST rate as applicable for their main service of Canteen Service also for bonus reimbursement or not - taxable at 5% or 18%? - HELD THAT - A combined reading of Section 15 and definition of consideration in the CGST/TGST Act, 2017 reveals that all payments made in respect of a supply constitutes the value of supply on which tax shall be levied under the charging section i.e., Section 9 according to the rates applicable in the notifications issued under the Act. If the applicant does not retain a portion of the Lump Sum amount received for payment of bonus in the form of commission then the entire bonus amount shall be included in the taxable value pertaining to the canteen services as the bonus is also paid by the service recipient in relation to the canteen services provided by the applicant to the recipient. Therefore the consideration received by the applicant as the value of supply including the amounts received in the name of bonus will be chargeable to tax at the rate of 2.5% under each of CGST - It is 5% on the entire bonus amount if no commission is taken/deducted, in the capacity as an intermediary, from the amount transferred by the service recipient. The applicant s point of view is that, they are taking the bonus consideration from service recipient which is meant to be paid to their employees, by acting as an intermediary, because of which they are issuing Invoice, for the bonus amount to be received, with GST Rate of 18%. If the applicant retains a portion of the Lump Sum amount received for payment of bonus, which is received from their service recipient to pay the same to their employees, in the form of commission then he is liable to pay GST at the rate applicable to Intermediary services on the commission retained and rest of the amount, after excluding the commission from the bonus, shall be included in the taxable value pertaining to the canteen services as the bonus is also paid by the service recipient in relation to the canteen services provided by the applicant to the recipient - It is 18% on the commission if he takes/deducts commission on the bonus amount as an intermediary and 5% on the rest of the bonus amount.
Issues Involved:
1. Rate of GST for reimbursement of bonus. 2. Applicability of the same GST rate for bonus reimbursement as for the main canteen service. 3. Basis for charging 5% GST instead of 18%. Summary: Issue 1: Rate of GST for Reimbursement of Bonus The applicant, M/s. Foodsutra Art Of Spices Private Limited, provides canteen services and receives a lump sum bonus for paying their employees. The applicant charges 18% GST for the bonus, while the service recipient insists on 5%. According to Section 9(1) and Section 15 of the CGST Act, 2017, the value of supply includes all payments made in relation to the supply of services. Since the bonus is related to the canteen services, it forms part of the supply value and is taxable at the rate applicable to canteen services. Therefore, the ruling states that the GST rate for the bonus reimbursement is 2.5% CGST and 2.5% SGST. Issue 2: Applicability of the Same GST Rate for Bonus Reimbursement as for Main Canteen Service The ruling clarifies that the amounts received as a bonus are in relation to the canteen services provided. As per the definition of "Restaurant service" in Notification No. 11/2017, the bonus forms part of the value of supply for canteen services. Therefore, the same GST rate of 2.5% CGST and 2.5% SGST applies to the bonus reimbursement. Issue 3: Basis for Charging 5% GST Instead of 18% The ruling explains that if the applicant retains a portion of the bonus as commission, the GST rate on the commission is 18%, while the rest of the bonus amount is taxed at 5%. If no commission is retained, the entire bonus amount is taxed at 5%. This is based on the combined reading of Section 15 and the definition of consideration in the CGST Act, 2017, which states that all payments made in respect of a supply constitute the value of supply on which tax is levied. Conclusion The Authority for Advance Ruling concluded that the GST rate for the reimbursement of the bonus is 2.5% CGST and 2.5% SGST. The same rate applies to the bonus reimbursement as for the main canteen service. The basis for charging 5% GST instead of 18% is detailed in the provisions of Section 15 and the definition of consideration in the CGST Act, 2017.
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