9911796707
TMI Blog2020 (2) TMI 1416X X X X Extracts X X X X X X X X Extracts X X X X ..... ufacturing 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, equipment's etc. The Applicant company recovers a nominal amount from the employees as a reimbursement of expenses under Employment relationship without any commercial objective but to maintain discipline and prevent wastage of food and resources. 1.5 A nominal amount is recovered by the company by way of Coupon Sale or by way of a card punch per meal from employees towards management costs of Canteen. 1.6 Further, the applicant company also purchases edible items like Sweets, Dry fruits, and gifts like electronics, gold & silver coins/articles for the purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction, 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 rules under clause (c). A6. Section 17 (5) (b)(i)specifies the situation where certain categories of input tax credit have been stated to be not available to the registered person and reads as follow: "Section 17. Apportionment of credit and blocked credits (5) Notwithstanding anything contained in sub-section (1) of Section 17 and subsection (1) of section 18, input tax credit shall not be available in respect of the following, namely:- (b) the following supply of goods or services or both- (i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery except wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the charges what they are recovering is less than what is actually the landing cost to the company. So, in this case, there is no value addition and the principle of GST is to tax value addition. b. Further, the amount recovered is under Employer-Employee relationship and anything which is done under such relationship is exempt from being taxed under Schedule-III(1) of the CGST Act, 2017 c. Moreover there is no defined Service Accounting Code for such supply of coupons or recovery of small amount by way of a card punch per meal and also the open/fair market value is not defined under the Act so in such case taxability shall not be arisen on coupon di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 for employees, if number of employees are more than 250. So, the company is under mandate by law to provide Canteen/food facilities to employees working therein. 4.3 The Applicant company provides Canteen food as a welfare measure to its employees. 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, equipments etc. But it recovers a nominal amount from the employees as a reimbursement of expenses under Employer- Employee relationship, without any commercial objective but to maintain discipline and prevent wastage of food and resources. 4.4 Howe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 business; (e) provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members; (f) admission, for a consideration, of persons to any premises; (g) services supplied by a person as the holder of an office which has been accepted by him in the course or furtherance of his trade, profession or vocation; (h) services provided by a race club by way of totalisator or a licence to book maker in such club ; and (i) any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities. But the claim of the input tax credit is subject to certain conditions and restrictions as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 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 above 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. As regards the issue of liability to pay tax on the distribution of coupons, it is important to understand the nature of contract between the applicant company (Musashi Auto Parts Private Limited) and the canteen and catering service provider (caterer). As per the agreement, the applicant undertakes to provide free of cost LPG gas supply, refrigerator, furniture, hot plates, wet grinder, fly cinder, geysers, water coolers and utensils suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate 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 payable for the goods or services or both; (c).................... (d)................... (e) Subsidies directly linked to the price excluding subsidies provided by the Central Government and State Governments. As discussed the applicant has been incurring the cost of LPG etc. and the caterer is subsidizing the food in lieu of that, therefore, in light of the provisions of section 15 (2) (b) and 15 (2) (e) of the Act, the values of coupon is a part of the value of services provided by the caterer and as such the coupon value is taxable. The applicant has further contended that the amount recovered from the employees against the coupon is under employer-employee relationship and anything done under such relationship is exempt from being taxed under Para 1 of Schedule III of the CGST Act, 2017. But Para 1 of the Sched ..... X X X X Extracts X X X X X X X X Extracts X X X X
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