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TMI Blog2020 (9) TMI 1246X X X X Extracts X X X X X X X X Extracts X X X X ..... tax net, there is no need for the valuation of the same for taxation purposes. Whether company is eligible to take Input Tax Credit on GST charged by vendor for Canteen services availed by it for its employees? - HELD THAT:- The provisions of sub-Section 17(5)(b) have since been amended w.e.f. 1.02.2019 - the substitution w.e.f. 1.02.2019 has imparted clarity to the relevant provisions of Section 17(5). After the substitution, it is now clear that Input Tax Credit on the 'Food and Beverage' services are available only where the registered person is making an outward taxable supply of the same category of goods or services. The benefit of the proviso to sub-Section 17(5) 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. has been made available only to the activity of (Ui) travel benefits extended to employees on vacation such as leave or home travel concession . The same is not available to the canteen service/ (supply of Food and Beverages as a service) - thus, the Input Tax Credit is not admissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T in Faridabad. In terms of Factories Act 1948 the Appellant are mandatorily providing canteen facility as they have 2400 full-time employees, viz. more than 250. A nominal amount, i.e. without commercial objective, is recovered to avoid wastage of food and resource and in order to maintain discipline. The same is recovered by way of card punch or coupon sale. Secondly, the applicant purchases Gold/Silver coins, electronic gift items, sweets, dry fruits etc. for the purpose of business promotion. II. QUESTIONS FOR ADVANCE RULING Advance Ruling was requested on the following questions:- CANTEEN SERVICES a. Whether company is eligible to take Input Tax Credit on GST charged by vendor for Canteen services availed by it for its employees; b. Whether distribution of Coupons among employees attracts GST liability? If yes, under which SAC (Services Accounting Code) tax shall be deducted; c. Is it correct to determine the fair market value of coupons, based on the rate charged to employees; DISTRIBUTION OF GIFT ITEMS FOR BUSINESS PROMOTION a. Whether company is eligible to take ITC on such business promotion expenses or not? ADVANCE RUL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il input tax credit. 3. They operate round the clock in shifts, having approximately 2400 number of full time working employees as well as contract based employees. They provide canteen/food facilities for employees which is mandatory under Factories Act where employees are more than 250. 4. They adheres to all rules, regulations and statutory obligations as Factories Act/ ESI/EPF Mise Provisions Act / Welfare Rules /Industrial Disputes Act / Contract Labour (Regulation and Abolition) Act etc. 5. That in order to maintain peace and tranquility and ensuring smooth industrial Relations they provide statutory and non-statutory facilities for employees. 6. They recover a nominal amount from the employees as a reimbursement of expenses under employment contract, without any commercial objective but to maintain discipline and prevent wastage of food and resources. 7. Not all employees avail the facility. The nominal amount is recovered by way of Coupon or a card punch per meal at a subsidised cost to be paid to canteen contractor. That, rest of the cost is incurred by them. Same is paid in full to canteen contractor. 8. They avail Input tax credit of GST amount paid t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t where an inward supply of goods or services or both of a particular category 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 . 17. That Section 17(5) is a 'notwithstanding' clause to enable provisions of Section 16(1) of the Act. The rationale for granting input tax credit is to avoid cascading effect of taxes. Thus, 'notwithstanding' in Section 17 discloses that only an exception has been made to the generality of beneficial provisions. That, it is a settled principle of law that exceptions ought to be read strictly and interpreted to provide best benefits. That, Hon'ble Supreme court has also mandated this in,- -Mangalore Chemicals and Fertilizers Ltd. v. Deputy Commissioner 1991 (55) E.L.T. 437 (S.C.), Union of India v. Wood Papers Ltd. Anr. 1990(47) ELT 500 Nutan Gems 1989 (39) ELT 503 (SC), 18. That, common proviso to Section 17(5) has been inserted in the Act w.e.f. 1st February, 2019 vided amendment Act of 2018, Provided that the input tax credit in respect of such goods or services or both sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacturing of automobile parts so the company has to give some benefits to its customer and employees by the way of presents in order to promote its business and if the applicant company would be denied of taking credit on expenses related to business promotion then the same shall lead to a cascading effect of tax and may resulted into a step back option for company from the business activity. There by the company shall be allowed to tax credit of tax paid in the course or furtherance of its business activity as per Section 16 of the CGST Act, 2017. In view of the above said contention, we would like to invite your kind attention towards the landmark judgments in which the expense related to business promotion is allowable for ITC. The same are mentioned as under:- 1. Coca Cola India Pvt. Ltd, vs. Commissioner of Central Excise (2009-VIL-06-HC-B0M-ST), The Mumbai High Court held, that 'activities in relation to business' would cover all conceivable activities that were directly or indirectly related to the functioning of the business, since the word 'business' itself related to an integrated and continued set of activities and was not confined and r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 25.08.2021 on behalf of the Appellant and emphasized on all the points already made in the Appeal whether as the grounds of Appeal or as their understanding of the facts in the case. However nothing new was added and the submissions amounted to reiteration of the earlier submissions only. V. DISCUSSION AND FINDINGS The questions raised for Advance Ruling are being reproduced below for ready reference:- CANTEEN SERVICES a. Whether company is eligible to take Input Tax Credit on GST charged by vendor for Canteen services availed by it for its employees; b. Whether distribution of Coupons among employees attracts GST liability? If yes, under which SAC (Services Accounting Code) tax shall be deducted; c. Is it correct to determine the fair market value of coupons, based on the rate charged to employees; DISTRIBUTION OF GIFT ITEMS FOR BUSINESS PROMOTION a. Whether company is eligible to take ITC on such business promotion expenses or not? A. Canteen services A.1 We take the second question, Whether distribution of Coupons among employees attracts GST liability? If yes, under which SAC (Services Accounting Code) tax shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hting and ventilation: (e) the interest on the amount spent on the provision and maintenance of the building, furniture and equipment provided for the canteen. [emphasis supplied] We find that No-profit and mandatory services being provided under legal obligation are tied to the employer's obligation towards the employees. These services, we find, are uniformly available to all the employees and are not restricted to any class of employees. These canteen services are, therefore, available to the employees essentially as a facility in the course of their employment. These are akin to facilities like uniform, safe-environs and first-aid. Accordingly we hold that a provisioning of canteen service to employees is not a taxable activity chargeable to GST. This replies to the 3rd question also, viz., Is it correct to determine the fair market value of coupons, based on the rate charged to employees? . The activity itself being outside the tax net, there is no need for the valuation of the same for taxation purposes. A. 2 Now we take the first question, Whether company is eligible to take Input Tax Credit on GST charged by vendor for Canteen services availed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery except where an inward supply of goods or services or both of a particular category 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; (iii) rent-a-cab, life insurance and health insurance except where,- (A) the Government notifies the services which are obligatory for an employer to provide to its employees under any law for the time being in force; or (B) such inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as part of a taxable composite or mixed supply; and (iv) travel benefits extended to employees on vacation such as leave or home travel concession; by The Central Goods and Services Tax (Amendment) Act, 2018 (No. 31 of 2018) - Brought into force w.e.f. 01st February, 2019.] Thus, we find that the substitution w.e.f. 1.02. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h as leave or home travel concession . The same, we hold, is not available to the canteen service/ (supply of Food and Beverages as a service). Accordingly we find, and hold, that the Input Tax Credit is not admissible to the Applicant. Accordingly, the Questions for Advance ruling are replied as under:- CANTEEN FACILITY Question 1: Whether company is eligible to take Input Tax Credit on GST charged by vendor for Canteen services availed by it for its employees; Ruling: No. Company M/s. Musashi Auto Parts India Private Limited is not eligible to Input Tax Credit on the GST charged by vendor, for Canteen services availed by it and provided to its employees. Question 2: Whether distribution of Coupons among employees attracts GST liability? If yes, under which SAC (Services Accounting Code) tax shall be deducted; Ruling: No. Distribution of Coupons among employees does not attract GST liability. Question 3: Is it correct to determine the fair market value of coupons, based on the rate charged to employees; Ruling : No. Since distribution of Coupons among employees does not attract GST liab ..... X X X X Extracts X X X X X X X X Extracts X X X X
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