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TMI Blog2022 (10) TMI 949X X X X Extracts X X X X X X X X Extracts X X X X ..... with respect to any goods and/or services or both amounts to or results in a supply of goods and/or services or both, within the meaning of that term. Proviso with reference to the Section 98(2) of CGST Act, 2017 states that where the questions raised in the application is already pending or decided in any proceedings in the case of the applicant under any provision of this Act, the application may be rejected by the Advance Ruling Authority after providing an opportunity of being heard to the applicant. And in the present case, the applicant has undertaken in form ARA-01 that the issue is neither pending nor decided in any proceedings under any of the provisions of the Act. Besides the applicable fees stands deposited by the applicant. So, he is eligible to seek an Advance Ruling under the above provisions and the case is being heard on merits. Statement of Facts as per ARA-01:- RITES Limited, a Government of India Enterprise was established in 1974, under the aegis of Indian Railways. RITES Limited is incorporated in India as a Public Limited Company under the Companies Act, 1956 and is governed by a Board of Directors which includes persons of eminence from various sectors of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riod. Also, in case of contractual employment, a surety bond of a fixed sum, say Rs. 1,00,000/- is executed by the Applicant company from such employee at the time of joining itself. Now, if such employee decides to leave/resigns from the organization before the completion of such bond period, the surety bond furnished by such employee is being forfeited by the company as a compensation for the loss caused to it due to non-completion of bond period by the contractual employee. For example, an employee has a bond period of 1 year and executed surety bond of Rs. 1,00,000/- at the time of joining. Now this employee decides to leave the Applicant company after working for 2 months i.e. before completing remaining period of 10 months as per his employment contract, then his bond amount of Rs. 1,00,000 will be encashed/forfeited by the Applicant company. The condition is described as under:- "In case of resignation during the training period or within a period of 3 years after completion of training, you are required to serve 3 months notice/equivalent salary in lieu thereof (GST additional as applicable) besides getting yourself absolved of the bond liability of Rs.1,00,000 (GST addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ized & fixed in advance. iii. An invoice of the catering services provided by the 3rd party canteen service provider is raised upon the Applicant along with applicable GST. iv. Against the same, Applicant recovers a nominal & subsidized amount from its employees and disburses the same to the 3rd party canteen service provider and remaining cost is incurred by the Applicant from its own pocket as a facility extended to its employees. D. Recovery on account of Loss/Replacement of ID Cards: Each employee of the Applicant company, in the event of loss of identity cards or when the card is damaged/becomes unserviceable, has to apply for re-issuance of fresh identity cards (ID Cards). The Applicant company shall issue the identity card post verification of the application from the manager concerned. In such cases mentioned supra, i.e., on account of loss/mutilation of ID Card, the applicant company charges Rs. 100/- per card from the employee for the re issuance of the Id Card. Here it is pertinent to mention that no separate services of any third-party contractor are availed by the Applicant company to issue/to print identity cards instead the same are printed through in-house facil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er is awarded) is also forfeited/deducted in certain cases owing to any damages, etc. G. Taxability of amount written off as Creditors balance in the books of account of the applicant:- Furthermore, the contractor, whose security deposit is deducted/received by the Applicant, after completion of work and when he is eligible to claim back such security deposit, does not come back to seek refund of such security deposit for a certain period of time or sometimes becomes untraceable for refund of Security Deposit. In such cases, after the management's decision, such security deposit of the contractor lying with the Applicant which is in effect expenditure of the Applicant to be incurred and reflecting on Liabilities side of Balance Sheet is written off by way of credit entry in Profit & Loss Account. Similarly, there may be certain other creditors balance which is lying unpaid/unclaimed for a certain period of time and where such creditor is untraceable, in such cases, the balance of such creditor is written off by the Applicant by way of a credit entry in Profit & Loss Account. Questions on which Advance Ruling is being sought:- 1. Whether the amount collected by the Applican ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hus, the same shall be out of the ambit of supply. Ergo, any amount received for an activity which is not considered as supply cannot be considered as taxable under the provisions of GST Law. (ii) Without prejudice to above, the amount recovered in lieu of un-served notice period does not qualify as 'consideration' instead it is compensation due to breach of the terms of Employment contract. Hence, due to absence of any 'consideration', the scope of supply is itself not fulfilled. (iii) Furthermore, the amount so received by the Applicant from the employee is a compensation for the loss caused to the Applicant's business due to untimely and immediate leave of its employee without service of due notice period. (iv) The Applicant has formed the above interpretation of law based on the resources material/judgements/Advance Ruling decisions which have already categorically held (both under GST regime as well as erstwhile Service Tax regime) that no liability to pay tax on Notice Pay Recovery & Surety Bond Forfeiture received from outgoing employee arise:- 2. Taxability of Amount collected for arranging the canteen facility for the employees of the Applicant comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned transaction has nexus with the principal business activity of the company. 4. Taxability of Liquidated damages charged due to delay in completion of work The Applicant has entered into a contract vide which if the contractual obligations are not fulfilled within the time prescribed by the contractee or extended time, if any, then the contractor shall be liable to pay agreed sum which is referred to as 'liquidated damages' in the contract itself. The Applicant is of the view that the amount received as a compensation due to delay in completion of work will not be taxable due to the reason that it is not recovered on account of any services rendered to another person and instead, is claimed towards damages incurred on account of delay/any other reason as stipulated in the agreement. 5. Taxability of forfeiture of Earnest Money, Security Deposit and Bank Guarantee The applicant forfeit the Earnest Money, Security Deposit and Bank Guarantee of the tenderers /Contractors in certain situations. The same are tabulated as under.- Sr.No. Situation 1. If after bid opening, but before expiry of bid validity or issue of Letter of acceptance, whichever is earlier, any tender ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble in future. Further, the applicant has also referred/submitted the following judgements and advance ruling decisions:- * Emcure Pharmaceuticals Ltd., cited in [2022] 134 taxmann.com 74 (AAR-MAHARASHTRA); * Amneal Pharmaceuticals Pvt. Ltd., cited in 2021 (9) TMI 1293 (AAAR-Gujarat); * Dishman Carbogen Amcis Ltd., cited in [2021] 132 taxmann.com (AAR-Gujarat); * Bharat Oman Refineries Limited, bearing no. MP/AAAR/07/2021 dated 08 November 2021 (AAAR - MADHYA PRADESH); * Tata Motors Ltd., cited in [2021] 129 taxmann.com 277 (AAR - GUJARAT); * North Shore Technologies Pvt. Ltd., cited in [2021] 125 taxmann.com 363 (AAR-UTTAR PRADESH); * DR Wilmar Schwabe (I) (P.) Ltd., cited in [2021] 133 taxmann.com 434 (AAR-UTTAR PRADESH); * Integrated Decisions & Systems India Pvt. Ltd., bearing no. GST-ARA 116/2019-20/B-113 dated 16 December 2021. * Para 2.9.3. of Taxation of Services: An Education Guide released by CBIC itself dated 20 June 2012. * M/S XL Healthcare Corporation India Private Limited v. Commissioner of Central Tax, Bengaluru South Commissionerate [Bangalore CESTAT Final Order No. 20225-20226/2022]; * Rajasthan Rajya Vidhyut Prasaran Nigam' Ltd. v. Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8.2022 of the CBIC. The authority is also of same view that the amount received as notice pay recovery by the applicant from the employees who leave the applicant company without serving mandatory notice period mentioned in the employment contract is not a consideration for any supply or services. Similarly, the action of surety bond forfeiture by the applicant (which is furnished by the contractual employee at the time of joining) of the employees who leave the company without serving minimum contract period as per the employment contract is also not a consideration per se. These amounts are covered under Schedule HIM and not clause 5(e) of schedule II appended with the CGST Act, 2017. So, it is outside the scope of supply because the said amount recovered by the applicant is in lieu of un-served notice period/non serving the contract period by the employees. It cannot be regarded as a consideration which has been defined in the section 2(31) of the Act. Further, the transaction with reference to the Notice Pay recovered/surety bond forfeiture are also not covered under the definition of business 2(17) under the CGST Act, 2017. Notice pay does not result into the provision of serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken on account of the legal obligation case upon the applicant. So, it is concluded that the said transaction of recovering the part payment of the meals from the staff by the applicant is outside the purview of scope of supply. 3. Whether the charges for re-issuance of ID card to the employees by the applicant company is an taxable event under the GST Act? It is noticed that the applicant uses the in-house printing facility for the services i.e. re-issuance of identity cards to the employees. Fee of Rs. 100 per card is charged for re-issuance by the applicant form its respective employee for issuance the new identity card. No third party contractor is availed for the printing of Id-cards. The Id-card is reissued in case of loss of the same or the card is in non serviceable condition. In this matter, the authority is of view that this transaction does not fall under the taxable event under the GST as it's covered under the schedule III(1) appended with the CGST Act, 2017. 4. Taxability on the transaction of liquidated damage charged due to delay in completion of work and forfeiture of Earnest Money/ Bank Guarantee /Security Deposit:- Factual as well as legal detail of the t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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