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TMI Blog2021 (12) TMI 320X X X X Extracts X X X X X X X X Extracts X X X X ..... ices to the employees? Levy of GST on payment of notice pay by an employee to the applicant - HELD THAT:- It is important to note that except due to exclusion by Para 1 of Schedule III, the services by an employee to an employer are also covered in supply, otherwise there should have been no need for such exclusion. lt is also important to note that Schedules are part of the GST Act. The Schedules contain specific provisions/exclusions, and therefore, they prevail over other general provisions of the GST Act - Section 7(1) is defining supply in an inclusive manner. Therefore, there can be other activities also which can be covered in supply even if they may not be a supply as per provisions of Section 7. There can be no dispute about this fact that the applicant as employer is tolerating the act or situation whereby the employee is not giving the notice for the agreed period of 30 days before leaving the service of the applicant-company . Thus, by relieving an employee without notice period or by accepting a shorter notice period, the applicant is tolerating an act or a situation created by such action of the employee, and therefore, it is covered by Para 5(e) of Schedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at actuals. Availability of ITC to the applicant in respect of inputs and input services pertaining to supply - HELD THAT:- The recovery of premium of Group Medical Insurance Policy from the non-dependent parents of employees retired employees at actuals is a supply of the said services by the applicant. It is an activity or transaction in connection with or incidental or ancillary to the main activity of the applicant, and therefore, it is covered in business as defined in Section 2(17) of GST Act - the transaction of supplying Group Medical Insurance services to the non-dependent parents of employees retired employees, and recovery of premium for the same, is a transaction which is in connection with or incidental or ancillary to the main business of the applicant, and therefore, the applicant shall be eligible to claim Input Tax Credit in respect of premium paid to insurance company to the extent of its further supply. Input tax credit in respect of Canteen services - HELD THAT:- In respect of telephone charges paid to BSNL, the applicant shall be eligible to claim Input Tax Credit, because it is a further taxable supply by the applicant. The said transaction come ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered under the Companies Act, 1956 with Registrar of Companies, Gwalior and is carrying on the business of Refining of Crude Oil in the Refinery located at Village Agasod, Bina. District Sagar, Madhya Pradesh. 3.2 M/s. Bharat Oman Refineries Limited is head quartered at Village Agasod. Bina, District Sagar (M.P.). 3.3 The applicant is registered under GST Act in the State of Madhya Pradesh, vide GSTIN : 23AABCB7084M1ZH and the principal place of business is at Gautam Nagar, Bhopal - 462023. 3.4 M/s BORL is a deemed Public Sector Undertaking, as the holding company. M/s Bharat Petroleum Corporation Limited (BPCL) has 51% paid up capital in the company. 3.5 This application u/s 97 of the Act seeking Advance Ruling is being made on the following points : (i) Determination of liability to pay tax on any goods or services or both. (ii) Admissibility of input tax credit of tax paid or deemed to have been paid. 4. QUESTION RAISED BEFORE THE AUTHORITY - 1. Whether GST is applicable on payment of notice pay by an employee to the applicant-employer in lieu of notice period under clause 5(e) of II of GST Act? 2. Whether GST is applicable on the amount of premi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overy of nominal amount for availing the facility of Canteen at the refinery at Bina when it is no supply as per clause 1 of schedule III of CGST ACT. 5.4. On Question IV Whether GST is applicable on recovery of telephone charges recovered from employees over above fixed rental charges payable to BSNL. The jurisdictional officer is of the view that GST is not applicable recovery of telephone charges recovered from employees over above fixed rental charges payable to BSNL. 5.5. On Question V Whether full ITC is available to the applicant as per question Nos II,III, IV or ITC will be restricted to the extent of GST borne by the applicant employer on the issues - A. Company provide canteen facility to its employees as per Factories Act, 1948. Since this is mandatory, ITC of canteen services provided to employees should be available in view of proviso to section 17(5)(h) of CGST Act. This clause is inserted vide CGST (Amendments) Act, 2018 w.e.f. 01-02-2019. Which provides 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their interpretation in respect of the questions raised by them in this application : Legal provisions referred and relied upon by the Applicant : [A] Section 2(17) of GST Act reads as under: (17) 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 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) act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies. (3) The value of exempt supply under sub-section (2) shall be such as may be prescribed, and shall include supplies on which the recipient is liable to pay tax on reverse charge basis, transactions in securities, sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building. Explanation : For the purposes of this sub-section, the expression value of exempt supply shall not include the value of activities or transactions specified in Schedule III, except those specified in paragraph 5 of the said Schedule. [F] SCHEDULE I [See Section 7] ACTIVITIES TO BE TREATED AS SUPPLY EVEN IF MADE WITHOUT CONSIDERATION 1 .. 2. Supply of goods or services or both between related persons or between distinct persons as specified in Section 25, when made in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant relied upon decision of Madras High Court in the case of GE T D India Ltd. Vs. Dy. Commissioner of Central Excise, Chennai in W.P. Nos. 35728 to 35734 of 2016 delivered on 7.11.2019 on the applicability of identical provisions under Service Tax regime. Copy of the said judgement is as EXHIBIT I. In the said judgment, the Madras High Court has ordered as under: Equally, so in my view, the employer cannot be said to have rendered any service per se much less a taxable service and has merely facilitated the exist of the employee upon imposition of a cost upon him for the sudden exit. The definition in clause (e) of Section 66E, as extracted above, is not attracted to the scenario before me as, in my considered view, the employer has not tolerated any act of the employee, but has permitted a sudden exit upon being compensated by the employee in this regard . Applicant s interpretation of legal provisions : As per interpretation of applicant, the applicant is of the opinion that the payment of notice pay is covered under clause 1 of Schedule III, which is not a supply under GST. Therefore, it shall not be covered by supply of service of tolerating an act under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Group Medical Insurance Policy at actuals pertaining to non-dependent parents of employees, and the retired employees. The applicant-company is not an insurance company and is not providing any insurance services. The service of insurance has been provided by insurance company and the applicant-company is simply collecting insurance premium at actuals for non-dependent parents and retired employees and remitting the same to the insurance company. Applicant s interpretation of legal provisions : As per definition of business , the collection of premium of insurance policy is not the business of the applicant. Moreover, this activity or transaction is not in connection with or incidental or ancillary to the business of the applicant. At the same time, it is pertinent to note that the applicant is not providing any service by way of insurance, and the applicant does not possess licence to provide insurance services. The said supply of insurance services by the applicant to its employees are not in the course or furtherance of business of the applicant. Thus, the applicant is not providing such services to the employees nor the applicant is competent to provide the said se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d parcel of employment contract between the employer and the employee. As such, it is a service by an employee to the employer in the course of or in relation to his employment. As per clause 1 of Schedule III of GST Act it is neither a supply of goods nor a supply of services. As per Section 7(2) of GST Act, Schedule III supersedes Schedule I and Schedule II. Canteen services provided by employer to its employees are in the course of for in relation to employment. The applicant is of the view that no GST is payable on supply of canteen services by employer to employees, as it is outside the purview of GST being part and parcel of employment contract. The list of documents and case law relied upon by the applicant: 1. Copy of documents regarding deduction towards canteen services at Bina - EXHIBIT 15 2. Copy of tax invoice manifesting canteen recovery from employees - EXHIBIT 16 QUESTION IV Whether GST is applicable on recovery of telephone charges recovered from the employees over and above the fixed rental charges payable to BSNL ? FACTS The applicant-company has provided telephone connections in all the flats of its Township. The employees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12 3. Copy of Advance Ruling dated 04.10.2019 of AAR-Maharashtra in the case of Jotun India (P) Ltd. - EXHIBIT 13 4. Copy of Advance Ruling dated 07.09.2018 of AAR-Maharashtra in the case of Pasco India Pune Processing Canter (P) Limited - EXHIBIT 14 QUESTION V Whether full ITC is available to the applicant as per question Nos. II, III IV, or ITC will be restricted to the extent of GST borne by the applicant-employer ? FACTS The facts relating to Question V are the same as are enumerated with Question Nos. II, III IV, as this question is related to availment of ITC with regard to inward supply of goods or services or both. Applicant s interpretation of legal provisions : As per Section 2(93) of GST Act, the applicant is recipient of services of health insurance and telecommunication services under question 2 4, and the consideration for the said services is payable by the applicant to the insurance company or telecommunication company and not by the employees from whom the recovery is made. But, as per Section 2(31), the recipient or any other person may make payment of consideration to the supplier. As such, it will not affect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lause and should prevail over activities and transactions contained in Schedule I and Schedule 11 and the scope of supply as described in Section 7(1). The activity of providing canteen services to the employees on FOC basis is covered by para 1 of Schedule III. The list of documents and case law relied upon by the applicant: 1. Copy of Press Release dated 10.7.2017 issued by CBIC - EXHIBIT 18 QUESTION VII If reply to Q. VI is yes, whether in view of the explanation to Section 17(3) of GST Act, ITC shall be available to the applicant on the goods and services used for providing free canteen services to the employees ? FACTS The facts relating to Question VII are the same as the facts relating to Question VI. 7. DISCUSSIONS AND FINDINGS - We went through the argument presented by the Applicant and department s view. Question 1 is relating to levy of GST on payment of notice pay by an employee to the applicant. Interpretation of law by the applicant : (1) The service of notice by the employee before leaving the organization is part and parcel of employment contract between the applicant and the employee. If the employee does not want to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5) Notwithstanding anything contained in sub-section (1) of Section 16 and sub-section (1) of Section 18, input tax credit shall not be available in respect of the following, namely : (a) (b) the following supply goods or services or both - (i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) except when used for the purposes specified therein, life insurance and health insurance : Provided that the input tax credit in respect of such goods or services or both shall be available where an inward supply of such goods or services or both is used by a registered person 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; (ii) membership of a club, health and fitness centre; and (iii) travel benefits extended to employees on vacation such as leave or home travel concession : Provided that the input tax credit in respect of such goods or services or both shall be available, where it is obligatory f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of Section 2(17) are also covered in business. Had the services been provided by applicant as pure agent as per Rule 33 of GST Rules, then there would have been no liability to pay GST. But, the applicant has not provided the insurance service to the non-dependent parents of employees retired employees as an agent of the Insurance Company. Therefore, the premium of Group Medical Insurance Policy recovered by applicant from the non-dependent parents of employees retired employees will fall within the ambit of supply and is liable to GST. Question 3 is relating to applicability of GST on recovery of nominal amount for availing canteen facilities by the employees. The applicant has himself accepted that the activity of supply of canteen services is in the course or furtherance of business of the applicant. It is part and parcel of employment contract between the employer and the employee. It is wrongly interpreted by the applicant that this transaction is covered by clause 1 of Schedule III. Clause 1 of Schedule III stipulates Services by an employee to the employer in the course of or in relation to his employment . But here employee is not providing any service rathe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction in connection with or incidental or ancillary to the main activity of the applicant, and therefore, it is covered in business as defined in Section 2(17) of GST Act. As per said section business includes any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not there is volume, frequency, continuity or regularity of such transaction. As per clause (b) of Section 2(17) any activity or transaction in connection with or incidental or ancillary to any activity or transaction referred in clause (a) of Section 2(17) are also covered in business. Thus, the transaction of supplying Group Medical Insurance services to the non-dependent parents of employees retired employees, and recovery of premium for the same, is a transaction which is in connection with or incidental or ancillary to the main business of the applicant, and therefore, the applicant shall be eligible to claim Input Tax Credit in respect of premium paid to insurance company to the extent of its further supply. Input tax credit in respect of Canteen services : As per clause (ii) of SI. No. 7 of Notification No. 11/2017-Central Tax (Rate), dt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... because it is a further taxable supply by the applicant. The said transaction comes under clause (b) of Section 2(17) as a transaction incidental or ancillary to the main business of the applicant, and is liable to tax. Moreover, telephone charges are not covered by the provisions of Section 17 relating to blocked credit Therefore, the applicant is eligible for ITC in respect of such telephone charges. Question 6 is relating to levy of GST on canteen services provided to the employees without charging any amount (free of cost). As per discussion in reply to question 3, it is clear that transactions between employer and employee are covered by clause 2 of Schedule I. It does not fall under pars I of Schedule III as that clause is pertaining to Services provided by an employee to the employer .. , while in case of supply of canteen services by the applicant to its employees, there is supply from the employer to the employee. Therefore, canteen services provided to the employees are to be treated as supply, even if there is no consideration. It will be liable to tax as per value determined in accordance with Rule 28. Question 7 is relating to eligibility for ITC in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible for the ITC on in respect of canteen services. (C) In respect of telephone charges paid to BSNL, the applicant shall be eligible to claim Input Tax Credit, as telephone charges are not covered by the provisions of Section 17 relating to blocked credit. 8.6 In respect of question number 6 canteen services provided to the employees are to be treated as supply, even if there is no consideration. It will be liable to tax as per value determined in accordance with Rule 28. 8.7 In respect of question number 7, the reply to this question is already duly covered by reply to question number 5, and the applicant shall not be eligible to claim Input Tax Credit in respect of canteen services in view of specific provision of clause (ii) of SI. No. 7 of Notification No. 11/2017-Central Tax (Rate), dt. 28.6.17, as substituted by Notification No. 20/2019-Central Tax (Rate), dt. 30.9.19, w.e.f. 10.10.19 read with clause (xxxii) of Paragraph 4 relating to explanation given in Notification No. 11/2017-Central Tax (Rate). 8.8 The ruling is valid subject to the provisions under section 103 (2) until and unless declared void under Section 104 (1) of the GST Act. - - TaxTMI - TMIT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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