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2024 (2) TMI 848 - AAR - GSTScope of supply - Providing canteen facilities for employees - Levy of GST on the portion of the amount recovered by the applicant from its employees towards the canteen facilities provided to them - Input Tax Credit on GST paid on the canteen services received from the CSP in terms of the proviso to section 17(5)(b) of the CGST Act - input tax credit in respect of the GST charged by the canteen service provider for the canteen facilities provided to employees on deputation and on business travel and temporary workers - input tax credit in respect of the inputs i.e. equipment and kitchen utensils utilized for providing canteen facilities to its employees. Whether the deduction of nominal amount made by the applicant from the employees who are availing canteen facilities 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 ibid, 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. The applicant's case is that they employ more than 250 employees who have been provided with canteen facility in terms of section 46 of the Factories Act, 1948. Now 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 is 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 copy of the Meal Policy. In view of the foregoing, it is held 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. Employees of SMC on deputation, employees of MSIL on business travel and Temporary/Contract worker's portion of canteen charges - HELD THAT - It is evident that the instant case in respect of temporary/contract workers, employees on deputation and employees on business travel, does not pass the test of employer-employee relationship and therefore does not fall within the ambit of entry 1 of Schedule III of CGST Act, 2017 - From the plain reading of the definition of business , it can be safely concluded that the supply of food by the applicant to its contractual worker, employees of SMC on deputation, employees of MSIL on business travel, would definitely come under clause (b) of section 2(17) as a transaction incidental or ancillary to the main business as the contractual worker are working for the company to run the business activity of the applicant. Even though, there is no profit as claimed by the applicant on the supply of food to its contractual worker, employees of SMC on deputation, employees of MSIL on business travel, there is indeed a supply , as provided in Section 7(1)(a) of the CGST Act, 2017. The applicant would definitely come under the definition of supplier , as per sub-section (105) of Section 2 of the CGST Act, 2017. Since the applicant recovers the cost of food from their contractual worker, employees of SMC on deputation, employees of MSIL on business travel, there is 'consideration', as defined in Section 2(31), ibid. - the applicant has established canteen facilities as mandated under section 46 of the Factories Act, 1948 and supplies food at a subsidized cost through CSP. The supply of food by the applicant is 'supply of service' by the applicant to such worker/s, the cost, which is recovered from the workers, as deferred payment is 'consideration' for the supply and GST is liable to be paid. Whether ITC of GST charged by the CSP can be availed by the applicant? - HELD THAT - ITC will be available to the applicant in respect of food and beverages as canteen facility is to be obligatorily 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 applicant only - Input Tax Credit will be available to the applicant in respect of canteen facility which is obligatory under the Factories Act, 1948. read with Gujarat Factories Rules, 1963. It is further held that the ITC on GST charged by the CSP will be restricted to the extent of cost borne by the applicant only. The recovery of amount from such employees/worker on account of third party canteen services provided by the applicant to employees of SMC on deputation, employees of MSIL on business travel and temporary workers including team lease employees who are on third party roll working within the factory premises would fall within the ambit of the definition of 'outward supply' as per section 2(83) of the CGST Act, 2017 and therefore, is liable to tax as a supply under GST. However, in terms of section 17(5)(b)(i), ITC is restricted in respect of supply of food and beverages. Thus, the applicant is not eligible for ITC in respect of the GST charged by the CSP for the canteen facilities provided to employees on deputation, employees on business travel and temporary/contract workers in terms of section 16 of the CGST Act, 2017. ITC in respect of the inputs i.e. equipment and kitchen utensils utilized for providing canteen facilities - HELD THAT - In terms of section 17(5)(b)(i) of the CGST Act, 2017 and notification No. 13/2018-CT (Rate) dated 26.7.2018 wherein the GST rate is without input tax credit on supply of food or any other article for human consumption or any drink at a canteen, mess etc., it is held that the applicant is not eligible for ITC on kitchen utensils and equipment like watercooler, dishwasher, plates, worktable, table etc. - the applicant is not eligible to avail ITC in respect of the inputs i.e. equipment and kitchen utensils utilized for providing canteen facilities.
Issues Involved:
1. GST liability on the amount recovered from employees for canteen facilities. 2. Eligibility for Input Tax Credit (ITC) on GST charged by the canteen service provider for permanent employees. 3. Eligibility for ITC on GST charged by the canteen service provider for employees on deputation, business travel, and temporary workers. 4. Eligibility for ITC on inputs like equipment and kitchen utensils used for providing canteen facilities. Summary: Issue 1: GST Liability on Amount Recovered from Employees for Canteen Facilities The applicant provides canteen facilities to its employees as mandated by Section 46 of the Factories Act, 1948. The deduction made by the applicant from the permanent employees for availing food in the factory canteen is not considered a 'supply' under section 7 of the CGST Act, 2017. However, this finding is only applicable to permanent employees and not to employees of SMC on deputation, MSIL on business travel, and temporary workers. For these categories, the recovery of the amount falls under the definition of 'outward supply' as per section 2(83) of the CGST Act, 2017, and is liable to tax under GST. Issue 2: Eligibility for ITC on GST Charged by Canteen Service Provider for Permanent Employees The applicant is eligible to avail ITC in respect of the GST charged by the canteen service provider for canteen facilities provided to its permanent employees. This is based on Section 17(5)(b) as amended effective from 1.2.2019 and clarified by CBIC circular No. 172/04/2022-GST dated 6.7.2022. The ITC is restricted to the extent of the cost borne by the applicant, disallowing proportionate credit embedded in the cost recovered from employees. Issue 3: Eligibility for ITC on GST Charged by Canteen Service Provider for Employees on Deputation, Business Travel, and Temporary Workers The applicant is not eligible to avail ITC for the GST charged by the canteen service provider for canteen facilities provided to employees of SMC on deputation, MSIL on business travel, and temporary workers. This is in accordance with section 17(5)(b)(i) of the CGST Act, 2017, which restricts ITC on supply of food and beverages. Issue 4: Eligibility for ITC on Inputs Used for Providing Canteen Facilities The applicant is not eligible to avail ITC on kitchen utensils and equipment like water coolers, dishwashers, plates, worktables, etc., used for providing canteen facilities. This ruling is based on section 17(5)(b)(i) of the CGST Act, 2017, and notification No. 13/2018-CT (Rate) dated 26.7.2018, which restricts ITC on such items. Ruling: 1. GST is not liable on the amount recovered from permanent employees for canteen facilities. However, it is liable on the amount recovered from employees of SMC on deputation, MSIL on business travel, and temporary workers. 2. The applicant is eligible for ITC on GST charged by the canteen service provider for permanent employees, restricted to the cost borne by the applicant. 3. The applicant is not eligible for ITC on GST charged by the canteen service provider for employees on deputation, business travel, and temporary workers. 4. The applicant is not eligible for ITC on inputs like equipment and kitchen utensils used for providing canteen facilities.
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