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2024 (7) TMI 981 - AAR - GSTClassification of supply - supply of service or not - deduction of a nominal amount by the Applicant from the salary of the employees who are availing the facility of food provided in the factory premises - applicability of GST on the nominal amount to be deducted from the salaries of employees - availability of ITC to the extent of cost borne by the applicant, to the Applicant on GST charged by the Canteen Service Provider for providing the catering services. Whether the deduction of a nominal amount made by the applicant from the salary of the employees who are availing the facility of food provided in the factory would be considered as a 'supply' of services by the applicant under the provisions of section 7 of the CGST Act, 2017? - HELD THAT - In terms of circular No. 172/04/2022-GST, it is clarified that perquisites provided by the 'employer' to the 'employee' in terms of contractual agreement entered into between the employer and the employee, will not be subjected to GST when the same are provided in terms of the contract between the employer and employee - The deduction of nominal amount made by the applicant from the salary of the employees who are availing the facility of food provided in the factory premises would not be considered as a Supply' under the provisions of section 7 of the CGST Act, 2017. Whether Input Tax Credit of GST charged by the CSP would be eligible for availment to the extent of cost borne by the applicant? - HELD THAT - The Input Tax Credit will be available to the applicant in respect of food and beverages as canteen facility is obligatorily to be provided under the Factories Act, 1948, read with Gujarat Factories Rules, 1963 as far as provision of canteen service employees working at the factory is concerned. It is further held that the ITC on GST charged by the canteen service provider will be restricted to the extent of cost borne by the applicant only - Input Tax Credit will be available to the appellant in respect of food and beverages as canteen facility is obligatorily to be provided under the Factories Act, 1948, read with Gujarat Factories Rules, 1963 as far as provision of canteen service for employees in factory is concerned.
Issues Involved:
1. Whether the deduction of a nominal amount from employees' salaries for food provided in the factory premises constitutes a "Supply of Service" under Section 7 of the CGST Act, 2017. 2. Applicability of GST on the nominal amount deducted from employees' salaries. 3. Eligibility of Input Tax Credit (ITC) for the applicant on GST charged by the Canteen Service Provider (CSP). Detailed Analysis: Issue 1: Supply of Service Relevant Provisions and Arguments: - Section 7 of the CGST Act, 2017 defines "supply" to include all forms of supply of goods or services for consideration in the course or furtherance of business. - Circular No. 172/04/2022-GST clarifies that perquisites provided by the employer to the employee as part of a contractual agreement are not subject to GST. - The applicant provides a canteen facility as mandated by Section 46 of the Factories Act, 1948, and deducts a nominal amount from employees' salaries for this service. Judgment: - The deduction of a nominal amount from employees' salaries for the canteen facility does not constitute a "supply" under Section 7 of the CGST Act, 2017. - The facility is provided as part of the employment contract and is a statutory obligation under the Factories Act, 1948. Issue 2: Applicability of GST Relevant Provisions and Arguments: - Since the deduction of the nominal amount does not constitute a "supply," the question of GST applicability becomes moot. Judgment: - The ruling on the applicability of GST on the nominal amount deducted from employees' salaries is rendered infructuous due to the decision on Issue 1. Issue 3: Input Tax Credit (ITC) Relevant Provisions and Arguments: - Section 17(5)(b) of the CGST Act, 2017, as amended effective from 1.2.2019, allows ITC on goods or services obligatory for an employer to provide under any law. - Circular No. 172/04/2022-GST clarifies that ITC on food and beverages is available if it is obligatory for the employer to provide such services under the law. - The applicant is mandated to provide canteen facilities under Section 46 of the Factories Act, 1948. Judgment: - ITC is available to the applicant for GST charged by the CSP for providing canteen services to employees. - ITC is restricted to the extent of the cost borne by the applicant, disallowing proportionate credit for the amount recovered from employees. Ruling: 1. The deduction of a nominal amount from the salary of employees availing the canteen facility does not constitute a "supply" under Section 7 of the CGST Act, 2017. 2. The question of GST applicability on the nominal amount is rendered infructuous. 3. ITC is available to the applicant on GST charged by the CSP for canteen services, restricted to the cost borne by the applicant, in accordance with Section 17(5)(b) of the CGST Act, 2017, and relevant circulars and statutory provisions.
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