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TMI Blog2020 (2) TMI 1416X X X X Extracts X X X X X X X X Extracts X X X X ..... business of manufacturing of automobiles and not in the business of provision of food or catering. The mandate of the Factories Act to provide meals to the employees does not mean that such provision is in the course of furtherance of business. Even if the provision of food and catering had been in the course of furtherance of business, the applicant would not have been entitled to the input tax credit in light of the express bar provided under section 17 (5) (b)(i) of the CGST Act, 2017. A careful reading of section 17(5) would suggest that this proviso is with regard to the provision contained in section 17 (5) (b)(iii) and not section 17 (5) (b)(i) - In light of the said provisions, the applicant is not eligible for claim of input tax credit with respect to the goods and services tax paid by it against the receipt of food and catering services supplied by the vendor. Liability to pay tax on the distribution of coupons - HELD THAT:- The applicant company is incurring expenditure with regard to these facilities provided to the caterer. The caterer provides food and beverage services to the employees of the applicant and payment to that effect is made to the caterer by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iability as per the provisions of Haryana Goods and Services Tax Act, 2017 and Central Goods and Services Tax Act, 2017 (hereinafter referred to as the CGST Act ) (hereinafter collectively referred to as Act ) with registration number 06AADCM1239R1Z5. 1.2 The Applicant has its unit at Bawal, Rewari ( Factory ) where the employees of the applicant are engaged in manufacturing of Products. Further, there are various managerial service employees also who carry out their day to day affairs from the said Factories. 1.3 The applicant company is a manufacturing unit of product as mentioned above having around 2400 of full time working employees as well as contract based employees. As per Section 46 of the Factories Act, 1948, it is mandatory for every Employer to provide canteen/food facilities for employees, if the number of employees are more than 250. So, company is under mandate by law to provide Canteen/food facilities to employees working there in. 1.4 The Applicant company incurs lots of expenses on maintenance of Canteen facility including deployment of its own employees for supervision management of canteen operations, providing utilities, supply of utensils, e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specifically been made non available to the registered person as specified in Section 17(5) of the Act. A 5. Section 46 (1) of Factories Act, 1948 specifies that the State Government may make rules requiring that in any specified factory wherein more than two hundred and fifty workers are ordinarily employed, a canteen or canteens shall be provided and maintained by the occupier for the use of the workers. (2) Without prejudice to the generality of the foregoing power, such rules may provide for- (a) The date by which such canteen shall be provided; (b) the standards in respect of construction, accommodation, furniture and other equipment of the canteen; (c) the foodstuffs to be served therein and the charges which may be made therefor; (d) the constitution of a managing committee for the canteen and representation of the workers in the management of the canteen; 1[(dd) the items of expenditure in the running of the canteen which are not to be taken into account in fixing the cost of foodstuffs and which shall be borne by the employer;] (e) The delegation to the Chief Inspector, subject to such conditions as may be prescribed, of the power to make r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , something which is mandatory to be done in the course or furtherance of business shall be allowed for Input Tax credit in order to eradicate the cascading effect of tax which was major intent behind the implementation of Goods and Services Tax. A 9. Keeping in view the aforementioned facts, Input Tax Credit on inward supply of Canteen Services shall be allowed under Section 16 of the CGST Act, 2017 B. Distribution of Coupons Among Employees on nominal amount for Canteen Service Arrangement: B 1. The applicant company recovers a nominal amount from the employees as a reimbursement of expenses under employment relationship against facility provided to them in order to maintain some discipline in canteen operations. So, in order to reimburse the same amount, company distributes coupons to interested employees for tea, snacks lunch so as to avoid any kind of wastage and maintain discipline. Keeping in view, the nature of transaction, the tax shall not be levied following the contention as mentioned under: a. The company is recovering the nominal charges in order to maintain discipline and not for the purpose of supply of such service. Also it is well pertinent that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether company is eligible to take Input Tax Credit on GST charged by vendor for Canteen Service availed by it for its employees? b) Whether distribution of Coupons among employees attracts GST Liability? If Yes, then under which SAC tax shall be deducted? c) Is it correct to determine the Fair market value of coupons based on the rate charged to employees? 3.2 Company purchases edible items like Sweets, Dry fruits and gifts like electronics, gold silver coins/articles etc. for the purpose of Business Promotion. Question arises as under: a) Whether Company is eligible to take Input Tax Credit on such business promotion expenses or not? 4. Discussion: 4.1 Musashi Auto Parts India Private Limited ( Applicant ) is a company incorporated under the provisions of the Companies Act, 1956/2013 and is engaged in the business of Manufacturing supply of Automobile Parts (Two Wheelers and Four Wheelers). 4.2 The applicant company is a manufacturing unit having approximately 2400 full time working employees as well as contract based employees. As per Section 46 of the Factories Act, 1948, it is mandatory for every Employer to provide canteen/food facilities f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is registered under Section 25, except a person having a unique identity number. (ii) The registered person has been charged the tax on receipt of goods or services or both. (iii) The said goods or services or both are used or are intended to be used by the registered person in the course or furtherance of business . Although the term in the course or furtherance of business has not been defined under the GST Act, but in general sense it means anything done in relation to business or while carrying out any business activity. The term business has been defined under Section 2(17) of the CGST Act which reads: business includes- (a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit; (b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a); (c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction; (d) supply or acquisition of goods including capital goods and services in connection with commencement or closure of bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply. In the instant case, the applicant is a registered taxable person who is paying tax (GST) on the inward supply of goods or services or both, food and catering service in this case. But the applicant is engaged in the business of manufacturing of automobiles and not in the business of provision of food or catering. The mandate of the Factories Act to provide meals to the employees does not mean that such provision is in the course of furtherance of business. Even if the provision of food and catering had been in the course of furtherance of business, the applicant would not have been entitled to the input tax credit in light of the express bar provided under section 17 (5) (b)(i) of the CGST Act, 2017. The applicant has relied upon the following proviso for its claim of input tax credit. Provided that the input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force. But a careful reading ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rice, then the question of open market value shall arise. The liability will then arise on the open market value and this will impact either as a burden on employees or an additional burden on the company which will ultimately impact on the cost the final product. 4.8 Section 15 of the CGST Act defines value of taxable supply. It reads:- 15. (1) The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply. (2) The value of supply shall include- (a) any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this Act, the State Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act, if charged separately by the supplier; (b) any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or pa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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