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TMI Blog2023 (4) TMI 297X X X X Extracts X X X X X X X X Extracts X X X X ..... ctivities which shall be treated neither as a supply of goods or services. The applicant's case is that they employ more than 250 persons who are full time employees and who have been provided with canteen facility in terms of section 46 of the Factories Act, 1948 read with Gujarat Factories Rules, 1963 - Now in terms of Circular No. 172/04/2022-GST, it is clarified that perquisites provided by the 'employer' to the 'employee' in terms of contractual agreement entered into between the employer and the employee, will not be subjected to GST when the same are provided in terms of the contract between the employer and employee. Thus, the subsidized deduction made by the applicant from the employees who are availing food in the factory would not be considered as a 'supply; under the provisions of section 7 of the CGST Act, 2017. Whether Input Tax Credit of GST charged by the CSP for the canteen services for its employees where the canteen facility is mandatory in terms of Section 46 of the Factories Act, 1948 read with Gujarat Factories Rules, 1963? - HELD THAT:- Input Tax Credit will be available to the appellant in respect of food and beverages as ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty provided by the employer to their employee in terms of contractual agreement entered into between them on the basis of the employment policy; that there is only one supply ie supply from CSP to employees and not from the CSP to the applicant, as the food gets consumed only by the employees; that the ultimate recipient of the canteen facility is the employee; that the applicant is only collecting the employees portion of the amount of canteen charges pays the consolidated total amount which includes the applicant's share, to the canteen service provider; that the applicant neither keeps any margin in this activity of collecting employees portion of amount nor makes any separate supply to the employees; that they wish to rely on the below mentioned case law/rulings viz,- M/s. Amneal Pharmaceuticals [Guj/GAAAR/Appeal/2021/07 dtd 8.3.2021] M/s. Tata Motors Ltd [Guj/GAAR/R/39/2021 dtd 30.7.21] M/s. Emcure Pharmaceuticals Ltd [Guj/GAAR/R/2022/38 dtd 10.8.22] M/s. Musashi Auto Parts IP Ltd [HAAAR/2020-21/16 dtd 31.3.2022] M/s. Cadila Healthcare Ltd [Guj/GAAR/2022/19 dtd 12.4.2022] M/s. Astral Ltd [Guj/GAAR/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the canteen service provider for the canteen services for its employees where the canteen facility is mandatory in terms of section 46 of the Factories Act. 1948. 8. Personal hearing was granted on 22.12.2022 and 28.2.2023 wherein Ms Khusboo Kundalia, Nrupesh Machchhar and Anil H Shah appeared on behalf of the applicant and reiterated the facts as stated in the application. During the course of personal hearing it was further stated,- that as of now they are discharging GST; that as far as contractual employees is concerned, they will continue to pay GST on the same. Discussion and findings 9. At the outset, we would like to state that the provisions of both the CGST Act and the GGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the GGST Act. 10. We have considered the submissions made by the applicant in their application for advance ruling as well as the submissions made during the course of personal hearing. We have also considered the issue involved, the relevant facts the appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a supply of goods and not as a supply of services; or (b) a supply of services and not as a supply of goods. Section 17. Apportionment of credit and blocked credits.- [relevant extracts] 5) Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (I) of section 18, input tax credit shall not be available in respect of the following, namely:- 2 [(a) ..................; (aa).................; (ab).................; (b) 3 [the following supply of 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; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. The said amendment in sub-section (5) of section 17 of the CGST Act was made based on the recommendations of GST Council in its 28th meeting. The intent of the said amendment in subsection (5) of section 17, as recommended by the GST Council in its 28th meeting, was made known to the trade and industry through the Press Note on Recommendations made during the 28th meeting of the GST Council, dated 21.07.2018. It had been clarified that scope of input tax credit is being widened, and it would now be made available in respect of Goods or services which are obligatory for an employer to provide to its employees, under any law for the time being in force. 3. Accordingly, it is clarified that the proviso after sub-clause (iii) of clause (b) of subsection (5) of section 17 of the CGST Act is applicable to the whole of clause (b) of subsection (5) of section 17 of the CGST Act. 5 Whether various perquisites provided by the employer to its employees in terms of contractual agreement entered into between the employer and the employee are liable for GST? 1. Schedule III to the CGST Act provides that services by employ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entered into between the employer and the employee, will not be subjected to GST when the same are provided in terms of the contract between the employer and employee. We find that factually there is no dispute as far as [a] the canteen facility is provided by the applicant as mandated in Section 46 of the Factories Act, 1948 read with the Gujarat Factories Rules, 1963 is concerned; and [b] the applicant has provided a sample photocopy of the appointment letter to their employees wherein at para 8 it is stated as follows: 8. You will be entitled to other benefits as per our discussion and as per the rules of the company in force from time to time. Further in terms of the Human Resource Manual, the relevant extract of which is provided, it is observed as follows:- Canteen Tea Policy: Employees will also be provided Meal Tea facilities for convenience, employees need to punch in the punching system placed in the canteen to avail meal facilities. The value will be deducted from the salary depending on the meals availed during the month considering current meal rate. Employees need to take Tea coupon from the time office to avail the facility of Tea from the c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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