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2024 (6) TMI 225 - AAAR - GSTIssues Involved: 1. Whether the subsidized deduction from employees for canteen services constitutes a "supply" u/s 7 of CGST Act, 2017. 2. Applicability of GST on the nominal amount deducted from employees' salaries and from the manpower supply contractor for contractual employees. 3. Eligibility of Input Tax Credit (ITC) for GST charged by the Canteen Service Provider. Summary: Issue 1: Subsidized Deduction as "Supply" The Appellant sought an Advance Ruling on whether the subsidized deduction from employees for canteen services constitutes a "supply" u/s 7 of CGST Act, 2017. The AAR, Rajasthan initially ruled that the application was not maintainable as the transactions were ongoing since July 2017 and GST was already being paid. The AAAR, however, noted that the contract with the canteen service provider was valid during the period when the ruling was sought, and the supplies were still ongoing. Thus, the AAAR held that the AAR erred in not pronouncing the ruling on merits and remanded the matter back to the AAR for reconsideration. Issue 2: GST Applicability on Nominal Amount Deducted The Appellant argued that the nominal amount deducted from employees' salaries for canteen services should not be considered as "supply" u/s 7 of CGST Act, as it is a statutory obligation under the Factories Act, 1948, and does not qualify as a commercial transaction. The AAAR noted that this issue needs to be reconsidered by the AAR on merits, taking into account the ongoing nature of the transactions and relevant legal provisions. Issue 3: Eligibility of ITC The Appellant contended that they should be eligible for ITC on the GST paid to the Canteen Service Provider as it is a statutory requirement u/s 46 of the Factories Act, 1948. The AAAR observed that this issue also needs to be reconsidered by the AAR on merits, particularly in light of the proviso to Section 17(5)(b) of CGST Act, which allows ITC where it is obligatory for an employer to provide such services under any law. Conclusion: The AAAR set aside the ruling of the AAR, Rajasthan dated 18.10.2022 and remanded the matter back to the AAR to decide the application afresh on merits, considering all the questions posed by the appellant in their application dated 11.03.2022.
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