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TMI Blog2023 (7) TMI 142X X X X Extracts X X X X X X X X Extracts X X X X ..... , supply means all forms of supply of goods/services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business - the 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 - the issue regarding levy of GST on the nominal amount to be deducted from the salaries of employees is rendered infructuous. Whether Input Tax Credit of GST charged by the CSP would be eligible for availment by the applicant? - HELD THAT:- Input Tax Credit will be available to the appellant in respect of food and beverages as canteen facility is obligatorily to be provided under the Factories Act, 1948, read with Gujarat Factories Rules, 1963 as far as provision of canteen service for employees other than contract employees is concerned. It is further held that the ITC on GST charged by the CSP will be restricted to the extent of cost borne by the appellant only - Input Tax Credit will be available to the appellant in respect of canteen facility which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant : Shri Suyash Maheshwari, CA, Shri Vikash Agarwal, CA and Shri Manish Kumar Mishra. Brief facts: M/s. Tata AutoComp Systems Ltd, Plot No. A-2, Tata Motors Vendors Park, North Kotpura, Ahmedabad, Gujarat-382110 [for short- applicant ] is registered under GST and their GSTIN is 24AAACT1848E1ZN. The applicant is a group entity of Tata AutoComp Systems Ltd. [for short TACO]. 2. The applicant is engaged in the manufacture, sale and trading of automotive parts and provides products and services to the Indian and global automotive OEMs as well as other Tier I suppliers. The applicant has engaged canteen service providers [for short CSP], transport service providers [for short TSP] who provide food and transportation facilities to the applicant s employees. 3. The applicant employs 322 employees, other than contract employees and is registered under the Factories Act, 1948. The applicant has appointed CSP, who is responsible for providing skilled manpower for the preparation of food and maintenance of canteen premises. 4. Being a part of TACO, policies set out by them are applicable group entities. TACO has set out Tata AutoComp Systems Ltd Transport Policy, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o IIT [WP No. 1768/1973] o Encure Pharmaceuticals Ltd [GST-ARA-119/2019-20/B/03 dtd 4.1.2022; o Anneal Pharmaceuticals Ltd [GUJ/GAAR/R/50/2020 dtd 30.7.20] o Posco India Pune Processing Centre P Ltd [GST-ARA-36/2018-19/B-110 dtd 7.9.2018] o Jotun India P Ltd [GST-ARA-19/2019-20/B-108] o that they are eligible to avail ITC on the GST charged by the CSP on account of the following reasoning viz o Circular 6.7.2022, supra clarifies that proviso at the end of section 17(5)(b), ibid is applicable to the entire clause (b); o that ITC on food and beverages would not be restricted provided it is obligatory for an employer to provide the same to its employees under any law for the time being in force; o that the canteen facility to its employees is in furtherance of its obligations under Factories Act; that the restriction imposed u/s 17(5), ibid is not applicable in the instant case since the canteen facility is extended to its employees as a part of its statutory obligations under the provisions of Factories Act; o that they would like to rely on the below mentioned rulings/circular which substantiate their averment that no GST is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; o Circular no. 177/9/22-TRU dtd 3.8.22; o that they are eligible to avail ITC on the GST charged by the TSP on account of the following reasoning viz o services provided are in pursuance of the applicant s obligation to provide such facilities to its employees in the course of its employment o ITC paid on supply of transportation services by a motor vehicle with the capacity of more than 13 persons shall be available as ITC; o that they wish to rely on the following circulars and rulings to substantiate their averment that they are eligible for ITC viz Tata Motors Ltd Dr William Schwabe (I) P Ltd [UP ADRG 79/2021] 10. Lastly, the applicant issues every employee an appointment letter highlighting various terms and condition of employment such as job band, designation, date of appointment, place of posting etc and the salary structure and the terms and condition governing the employment. In terms of the said agreement, where an employee fails to serve the specified notice period or serves a shorter tenure, the applicant deducts an amount equivalent to salary for the tenure of notice period not served as a compensation for the breac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 7 of CGST and GGST? 2b. Whether ITC is available to the applicant on GST charged by the transport service providers for providing the non air conditioned bus transportation services? 3. Whether GST is applicable on salary deducted in lieu of notice period from the full and final settlement of the employees leaving the company without completing or serving the complete notice period as specified in the appointment letter? 13. Personal hearing was granted on 08.05.2023 wherein Shri Suyash Maheshwari, CA, Shri Vikash Agarwal, CA and Shri Manish Kumar Mishra, appeared on behalf of the applicant and reiterated the facts as stated in the application. They relied upon the judgments cited in the application. In respect of canteen service provider they informed that the issue remains settled. In respect of transportation recovered it was informed that they have hired the bus. On being asked they informed that there is no legal obligation. For ITC they relied on the 28 th GST Council Meeting. Regarding notice pay they believe it is not a supply and relied on a CBIC circular. Discussion and findings 14. At the outset, we would like to state that the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ither as a supply of goods nor a supply of services. (3) Subject to the provisions of 5[sub-sections (1), (1A) and (2)], the Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as- (a) 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 (1) of section 18, input tax credit shall not be available in respect of the following, namely: - (a) motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver), except when they are used for making the following taxable supplies, namely:- (A) further supply of such motor vehicles: or (B) transportation of passengers: or (C) imparting training on driving such motor vehicles: (aa) ..: (ab) ..: (b) [the following supply of goods or services or both- (i) food and beverages, outdoor catering, beauty treatment, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T Act is applicable to the entire clause (b) or the said proviso is applicable only to sub-clause (iii) of clause (b)? 1. Vide the Central Goods and Service Tax (Amendment Act) 2018, clause (b) of sub-section (5) of section 17 of the CGST Act was substituted with effect from 01.02.2019. After the said substitution, the proviso after sub- clause (iii) of clause (b) of sub-section (5) of section 17 of the CGST Act provides as under: 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. 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 28 th meeting. The intent of the said amendment in sub- section (5) of section 17, as recommended by the GST Council in its 28 th meeting, was made known to the trade and industry through the Press Note on Recommendations made during the 28 th meeting of the GST Council, dated 21.07.2018. It had been clarified that scope of input tax credit is being widened, and it wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices. The applicant s case is that they employ about 322 persons other than contract employees who have been provided with canteen facility in terms of section 46 of the Factories Act, 1948. The applicants primary role is that he has set up a canteen facility, having a demarcated area in the factory premises, pursuant to in compliance with the Factories Act; that the said canteen facility has a seating area with tables and chairs, a facility of utensils, refrigeration, storage rooms for keeping the cooked food, washrooms and wash basin, etc.. 19. 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. 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 is concerned; and [b] the applicant has provided a sample copy of the employment agreement and a copy of Canteen and Transport policy of Tata AutoComp Sy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant in respect of food and beverages as canteen facility is obligatorily to be provided under the Factories Act, 1948, read with Gujarat Factories Rules, 1963 as far as provision of canteen service for employees other than contract employees is concerned. It is further held that the ITC on GST charged by the CSP will be restricted to the extent of cost borne by the appellant only. Our view is substantiated by the Ruling of the Gujarat Appellate Authority for Advance Ruling order No. GUJ/GAAAR/Appeal/2022/23 dated 22.12.2022 in the case of M/s. Tata Motors Ltd, Ahmedabad. 23. In view of the foregoing, we hold that Input Tax Credit will be available to the appellant in respect of canteen facility which is obligatory under the Factories Act, 1948, read with Gujarat Factories Rules, 1963. Transportation 24. The second issue to be decided is whether the services by way of non air conditioned bus transportation facility provided by the TSP is supply of service by the applicant to its employees under the provisions of section 7 of the CGST Act, 2017. What section 7 encompasses is mentioned supra in para 18. 25. The applicant s contention is that since they ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... already reproduced supra. 28. The amended section 17(5) wef 1.2.2019 has allowed availment of ITC on leasing, renting or hiring of motor vehicles for transportation of persons having approved seating capacity of more than 13 persons (including driver). 29. The sample copy of the agreement with the TSP enclosed with the application is dated 16.9.2019, which as per Effective date duration would last for 3 years. Hence, it is not clear whether the agreement is still in vogue. However, in the said agreement the buses hired are having a capacity of more than 13 seats. Therefore, we are of the opinion that the applicant is eligible for ITC however subject to the condition that the buses they have hired is more than 13 seater, wef 1.2.2019. Our view is substantiated by the ruling in the case of M/s. Tata Motors Limited [GST-ARA- 23/2019-20/B- 46], Dr. Willmar Schwabe (I) P Ltd 12021 133 taxmann.com] and Emcure Pharmaceuticals Ltd [GUJ/GAAR/R/2022/22] 30. It is further held that the ITC on GST charged by the TSP will be restricted to the extent of cost borne by the appellant only taking the analogy from the ruling of the GAAAR vide its order No. GUJ/GAAAR/Appeal/2022/23 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the answer to the above is not in the affirmative, the ruling sought in respect of the question listed at 1(a) is rendered infructuous. 1 (c). Input Tax Credit (ITC) will be available to the applicant on GST charged by the service provider in respect of canteen facility provided to its employees other than contract employees working in their factory, in view of the provisions of Section 17(5)(b) as amended effective from 1.2.2019 and clarification issued by CBIC vide circular No. 172/04/2022-GST dated 6.7.2022 read with provisions of section 46 of the Factories Act, 1948 and read with provisions of Gujarat Factory Rules, 1963. ITC on the above is restricted to the extent of the cost borne by the applicant for providing canteen services to its employees, but disallowing proportionate credit to the extent embedded in the cost of goods recovered from such employees. 2a. The services by the way of non air conditioned bus transport facility provided by TSPs would not be construed as supply of service by the applicant to its employees under the provisions of section 7 of CGST and GGST. 2b. ITC is available to the applicant on GST charged by the TSPs for providing the non ..... X X X X Extracts X X X X X X X X Extracts X X X X
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