2019 (8) TMI 1282 - AAR - GST

Input tax credit - Procurement of medicines for personal consumption of employees - inward supply of medicines which are used or intended to be used in the course or furtherance of business of the applicant - scope of blocked credit under section 17(5)(e) section 17(5)(h) and section 17(5)(i) of the Act - Medicines for consumption of its employees and pensioners and their dependents - HELD THAT - The applicant has their own in-house hospital for use by the employees retirees and their dependents. This is a free center where all the services and medicines are provided free to the employees. No consideration is charged from the employees for this. This provision of free medical care is mandatory as per the Regulations made under Major Ports Act. These are mandated to be provided to the applicant s employees their dependents pensioners and family pensioners for their own in-patient and out-patient treatments - These treatments include medicines which are also provided free of charge to the employees for their personal use. The medicines and medical facilities are proved by the applicant to its employees for their personal use. Therefore as per Section 17 (5) (g) of CGST/TNGST ACT input tax credit is not available for the medicine that the applicant is procuring for the consumption of its employees and pensioners and their dependents. The applicant has stated in their application that these are not goods for personal consumption as the applicant pays for the same - The argument does not hold - The fact of who pays for the medicines here is irrelevant to the usage of the said medicines. They are used by the employees and dependents and hence are for personal consumption and the applicant is ineligible to take input tax credit on the inward supply of medicines used to provide health facilities to its employees in its hospital. The applicant is not entitled to take credit of input tax charged on the inward supply of medicines which are used to provide medical facilities to the employees pensioners and dependents in the in-house hospital.

Summary

Issues Involved:
1. Eligibility for Input Tax Credit (ITC) on inward supply of medicines used in the applicant’s in-house hospital for employees, pensioners, and dependents.

Issue-wise Detailed Analysis:

1. Eligibility for Input Tax Credit (ITC) on Inward Supply of Medicines:
The primary issue is whether the applicant is entitled to claim ITC on the inward supply of medicines used in their in-house hospital for employees, pensioners, and dependents.

Applicant’s Arguments:
- The applicant, engaged in port services and incidental supply of goods, maintains an in-house hospital providing free medical services to employees and pensioners.
- The applicant contends that these inward supplies of medicines are used in the course or furtherance of their business and should not be considered blocked credits under Section 17(5)(g) of the CGST Act.
- The applicant argues that the cost of medicines is borne by them as part of the service contract with employees and pensioners, thus not falling under "goods used for personal consumption."

Submissions and Evidence:
- The applicant provided regulations under the Major Port Trusts Act, 1963, governing the provision of medical benefits to employees.
- They submitted documents including appointment orders, details of the hospital, and financial documents to substantiate their claim.
- The applicant cited a CESTAT Mumbai decision, arguing that providing medical facilities is part of the employment contract and should qualify for ITC.

State Jurisdictional Officer’s Remarks:
- The officer argued that providing medical facilities is not part of the applicant’s business activity but a service rule.
- Medicines supplied free of charge to employees and pensioners amount to free supply, making the applicant ineligible for ITC.

Authority’s Analysis:
- The Authority examined the statutory provisions under Section 16(1) and Section 17(5) of the CGST Act.
- Section 16(1) allows ITC on goods or services used in the course of business, while Section 17(5)(g) blocks ITC on goods or services used for personal consumption.
- The Authority noted that the in-house hospital provides free medical services to employees, pensioners, and dependents, which are mandatory under the Major Port Trusts Act regulations.
- The medicines and medical facilities are provided free of charge and are for the personal use of employees and their dependents.

Conclusion:
- The Authority concluded that the inward supply of medicines used in the in-house hospital is for personal consumption of the employees and their dependents.
- As per Section 17(5)(g) of the CGST Act, ITC is not available for goods or services used for personal consumption.
- Therefore, the applicant is not entitled to claim ITC on the inward supply of medicines used in their in-house hospital.

Ruling:
The applicant is not entitled to take credit of input tax charged on the inward supply of medicines used to provide medical facilities to employees, pensioners, and dependents in the in-house hospital.