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2024 (1) TMI 703 - AAR - GSTSupply or not - subsidized deduction made by the applicant from the employees who are ultimate recipient of canteen facility provided in factory/corporate office - valuation of GST - eligibility to take ITC for the GST charged by the CSP for canteen services, where the canteen facility is mandatory in terms of section 46 of the Factories Act, 1948. Whether the deduction of nominal amount made by the applicant from the employees who are availing food in the factory premises would be considered as a supply under the provisions of section 7 of the CGST Act, 2017? - HELD THAT - In terms of Section 7 of the CGST Act, 2017, supply means all forms of supply of goods/services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business. The exception being Schedule I, which includes the activities made or agreed to be made without a consideration and Schedule III, which includes activities which shall be treated neither as a supply of goods or services. 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 - it is found that factually there is no dispute as far as a the canteen facility is provided by the applicant as mandated in Section 46 of the Factories Act, 1948 is concerned; and b the applicant has provided a sample copy of the HR Manual only one page reproduced supra. In view of the foregoing, we hold that the deduction made by the applicant from the employees who are availing food in the factory would not be considered as a supply under the provisions of section 7 of the CGST Act, 2017. Valuation of GST - HELD THAT - Since the answer to the above is not in the affirmative, the ruling sought in respect of the second question is rendered infructuous. Whether the Company is eligible to take the ITC for the GST charged by the CSP for canteen services, where the canteen facility is mandatory in terms of section 46 of the Factories Act, 1948? - HELD THAT - 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 is concerned. It is further held that the ITC on GST charged by the CSP will be restricted to the extent of cost borne by the appellant only.
Issues Involved:
1. Whether the subsidized deduction made by the applicant from the employees who are the ultimate recipients of the canteen facility would be considered as a 'supply' under the CGST Act, 2017 and GGST Act, 2017. 2. If the answer to the above is affirmative, the value at which GST is payable. 3. Whether the Company is eligible to take the Input Tax Credit (ITC) for the GST charged by the Canteen Service Provider (CSP) for canteen services. Summary of Judgment: Issue 1: Whether the subsidized deduction is considered as 'supply' The applicant, M/s Kohler India Corporation Private Limited, provides canteen facilities to its employees as mandated by Section 46 of the Factories Act, 1948. The deduction made by the applicant from the employees who avail food in the factory is not considered as a 'supply' under Section 7 of the CGST Act, 2017. This is based on Circular No. 172/04/2022-GST, which clarifies that perquisites provided by the employer to the employee in terms of a contractual agreement are not subjected to GST. Issue 2: Value at which GST is payable Since the deduction from employees is not considered a 'supply,' the question regarding the value at which GST is payable is rendered infructuous. Issue 3: Eligibility to take Input Tax Credit (ITC) The applicant is eligible to avail ITC on the GST charged by the CSP for canteen services provided to its employees. This eligibility is based on the proviso to Section 17(5)(b) of the CGST Act, 2017, which allows ITC for goods or services that an employer is obligated to provide to employees under any law. The ITC is restricted to the extent of the cost borne by the applicant, disallowing proportionate credit embedded in the cost recovered from employees. Ruling: 1. The deduction from employees' salaries for canteen facilities is not considered a 'supply' under the CGST Act, 2017, and GGST Act, 2017. 2. Since the above is not considered a 'supply,' the question of the value at which GST is payable is moot. 3. ITC is available to the applicant on GST charged by the CSP for canteen services, restricted to the cost borne by the applicant, excluding the portion recovered from employees.
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