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2023 (11) TMI 658 - AAR - GSTSupply or not - levy of GST - canteen facilities provided to its employees - tax on recoveries being made by the applicant from its employees towards the canteen and transportation facilities provided to them - Section 7 of the CGST Act - eligibility to ITC on the GST paid on canteen services in terms of proviso to Section 17(5)(b) of the CGST Act, 2017. Reliance placed on clarification provided by CBIC in Circular No. 172/04/2022 dt 06.07.2022 and the press release no. 73/2017 dt 10.07.2017 wherein it was clarified by the CBIC that prerequisites provided by the employer to its employees in terms of contractual agreement will not be subjected to GST. Whether GST is liable to be discharged on the recoveries being made by the applicant from its employees towards the canteen facilities provided to them? - HELD THAT - The perquisites provided by the employer, canteen services in the present case, to their employees in terms of the contractual agreement between the employer and his employees as submitted by them, are in lieu of the services provided by them to their employees in relation to employment. Therefore the perquisites provided by the employer to the employee, in terms of contractual agreement, will not be subjected to GST. However if the employer makes taxable supply of canteen services to employees by charging consideration for the purpose of business, instead of providing them as a perquisite, the same will be subject to payment of GST, at prescribed rates, as per provisions of CGST/TGST Act 2017. Whether the applicant is eligible to avail input tax credit in respect of the GST paid on inward supplies used for providing canteen facilities? - HELD THAT - As per Section 17(5)(b) of CGST/TGST Act 2017 input tax credit in respect of such canteen facilities shall be available, where it is obligatory for an employer to provide the same to its employees under Factories Act, 1948. Whether GST is liable to be discharged on the recoveries being made by the applicant from its employees towards the transportation facilities provided to them? - HELD THAT - The transportation services, if provided as a perquisite by the employer to the employee, in terms of contractual agreement between the employer and employee, will not be subjected to GST. However if the employer makes taxable supply of transportation services to employees by charging consideration for the purpose of business, instead of providing them as a perquisite, the same will be subject to payment of GST, at prescribed rates, as per provisions of CGST/TGST Act 2017. Whether the applicant is eligible to avail input tax credit in respect of the GST paid on inward supplies used for providing transportation facilities? - HELD THAT - Provision of service of transportation of employees from residence to office premises is for personal consumption or comfort of employees but not an activity which is part of business as the business of the applicant is to manufacture supply of pre-engineered buildings and storage racking systems but not supply of transportation of employees or passengers. Input tax credit shall not be available in respect of goods or services or both used for personal consumption as per Section 17(5)(g) of CGST/TGST Act 2017.
Issues Involved:
1. GST liability on recoveries for canteen and transportation facilities provided to employees. 2. Eligibility for Input Tax Credit (ITC) on GST paid for canteen and transportation facilities. Issue 1: GST Liability on Canteen and Transportation Facilities Canteen Services: The applicant, M/s. Kirby Building Systems & Structures India Private Limited, is mandated under Section 46 of the Factories Act, 1948, to provide canteen facilities to employees. The CBIC Circular No. 172/04/2022 clarifies that perquisites provided by the employer to employees under a contractual agreement are not subject to GST. Therefore, the canteen services provided as a perquisite under the employment contract and statutory obligation are exempt from GST. If the applicant recovers only nominal amounts and records these costs in their books, they are eligible for ITC as per the proviso to Section 17(5)(b). Transportation Services: Notification No. 12/2017 exempts transport of passengers by non-air-conditioned contract carriage. However, the applicant is not under a statutory obligation to provide these services, making the proviso to Section 17(5)(b) inapplicable for claiming ITC on transportation services. The transportation services provided are for personal use, not part of business activity, and therefore not eligible for ITC under Section 17(5)(g). Issue 2: Eligibility for Input Tax Credit (ITC) Canteen Services: As per Section 17(5)(b) of the CGST/TGST Act, 2017, ITC is available for canteen facilities if it is obligatory for the employer to provide them under the Factories Act, 1948. The CBIC Circular No. 172/04/2022 confirms that perquisites provided by the employer to employees under a contractual agreement are not subject to GST. Transportation Services: Provision of transportation services is for personal consumption of employees. As per Section 17(5)(g) of the CGST/TGST Act, 2017, ITC is not available for goods or services used for personal consumption. The transportation services provided by the applicant do not qualify as 'input service' under Section 2(60) of the CGST/TGST Act, 2017, as they are not used in the course of business. Rulings: State Member: 1. Canteen services provided by the factory to its employees are exempt from GST. 2. ITC is available for canteen services if costs are borne by the applicant and recorded in their books. 3. Transportation services provided are exempt under Notification No. 12/2017. 4. ITC is not available for transportation services as they are not obligatory and are for personal use. Central Member: 1. Canteen services provided as perquisites are not subject to GST. If provided for business purposes, they are subject to GST. 2. ITC is available for canteen facilities if obligatory under the Factories Act, 1948. 3. Transportation services provided as perquisites are not subject to GST. If provided for business purposes, they are subject to GST. 4. ITC is not available for transportation services as they are for personal consumption and not part of business activity. The Authority for Advance Ruling concurred in the ruling and discussed it independently.
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