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TMI Blog2023 (12) TMI 507X X X X Extracts X X X X X X X X Extracts X X X X ..... the cost incurred by the Applicant and there is not enforceable reciprocal obligations. However, the running of canteen in the premises of the Applicant is in the course of furtherance of business. It is also clear that in running of such a canteen, the employer, i.e., the Applicant is mandated to bear certain costs. Provision of canteen facility and bearing certain costs in running of canteen are mandated on the part of the employer as per the Factories Act. Accordingly, such canteens are provided. It has been established that the supply of food in the canteens are Supply of Service by the Applicant - In the instant case, the Appellant had established the canteen in their premises and has been bearing a part of the cost for providing the food/beverages to their employees and a part of the cost is being collected from employees, by adopting subsidized rates. The supply of the food/beverages, although at subsidized rates, by the Applicant to their employees is certainly an activity amounting to supply of service and attracts levy of GST on that part of the consideration being charged for such supply. Whether subsidized food is a perquisite to employees forming a part of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Central Goods and Service Tax Act and the Tamil Nadu Goods and Service Tax Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Service Tax Act would also mean a reference to the same provisions under the Tamil Nadu Goods and Service Tax Act. M/s. Sundaram Clayton Limited, Auto Ancillary, SEZ, AA5, VI Avenue, Mahindra World City, Natham, Kanchipuram, Chennai 603002 (herein after referred to as The Applicant ), are registered with GST and hold GSTIN 33AAACS4920J2ZI. The Applicant is engaged in the manufacture and supply of die-casting parts for use in automobiles. 2.1. The Applicant has submitted the copy of application in Form GST ARA - 01 and also submitted a copy of challan evidencing payment of application fees of Rs. 5,000/- each under sub-rule (1) of Rule 104 of CGST Rules 2017 and SGST Rules 2017. 2.2. The Applicant submitted that,- They have over 250 people working at their plant which includes employees and trainees, who are in their payrolls and also include contractual workers who are on the rolls of third party. Section 46 of the Fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of European Court of Justice in the case of R.J. Tolsma V Inspecteur Omzetbelasting Leewarden in the case C-16/93. There is no legal intention between them and the workers to provide canteen services for a consideration, but it is only a statutory obligation under the Factories Act; There is no actual agreement between them and the workers with a positive act for consideration; The mention of provision of canteen facility in the HR policy and the Wage Agreement with employees cannot be called an agreement entered into by the parties to provide/avail canteen facility; The HR policy and the Wage Agreement merely specifies the facilities that are available to the workers, which are common to all and hence cannot be equated with an agreement to supply goods or services. The second requirement is the presence of consideration against the supply; If an activity is undertaken but there was no agreement between the parties, any payment received by a party cannot be automatically linked to a supply for the purpose of levying GST; In this regard, reliance was place on the judgment of Bombay High Court in the case of Bai Mumbai Trust, Vithaldas Laxmidas Bhatia, Smt. Indu Vithald ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cited supra and meaning of the term perquisite as per Section 17(2) of the Income Tax Act, 1961, it emerges that the intention of the Circular is to clarify that GST is not applicable on a perquisite which is part of the employment agreement and which may be free of cost for the employees; Consequently, in case where a recovery is made against a supply, the same may be subject to GST; Regarding recoveries from workers other than employees, it is an unrelated party transaction and therefore GST can apply on the transaction value only. In this regard, reliance is placed on TNAAR ruling in the case of M/s Kothari Sugar and Chemicals Limited [No. 20/AAR/2022 dated 31.05.2022]. 3.1. The Applicants were offered personal hearing on 23.08.2023, wherein Shri. Kulraj Ashpnani and Mr. Arun Fatela, Chartered Accountants (Authorised Representatives -AR) appeared for the Applicant and reiterated the submissions made in the application. He submitted copies of Employment letter and Wage Agreement, wherein mentioned was made regarding recovery of subsidised charges for availing canteen facility. The AR also cited the following ruling passed by AARs of other states, where the issue was de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be subjected to GST. There are no pending proceedings in the Applicant s case on the issue raised in the application. 4.2. The Applicant s jurisdictional State Authority has not submitted any remarks and hence it is presumed that there are no pending proceedings in the Applicant s case on the issue raised in the application. DISCUSSION AND FINDINGS: 5.1. We have considered the submissions made by the applicant in their application for advance ruling and the submissions made by their AR during the course of personal hearing and additional submissions made thereon with reference to the issues involved and relevant facts. 5.2. Before moving further, we have to determine the admissibility of the application. In terms of Section 97(2) of the CGST/TNGST Act, Question which advance ruling is sought under the Act, falls within the scope of Section 97(2)(e) (g) of the CGST/TNGST Act, 2017, and therefore the application is admissible. 5.3. The Applicant has raised the following question on which he has sought Advance Ruling: Whether recovery of subsidised value from employees for providing canteen facility would (a) amount to supply under the CGST Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat canteen recovery of Rs. 5/- per day remains unchanged. 6.2. From the above, we find that Applicant provides canteen facility and is providing meals/food at concessional rates, i.e., no meal is extended free and specified amount in respect of the food consumed by the employee are collected by the Applicant against such consumption of food. Further, as seen from the documents furnished i.e. appointment order, availing the canteen facility made available by the Applicant in their premises is not mandatory. With the above facts, the question sought on the liability to pay GST on the amount collected by the employees is taken up. 7.1. Firstly, the first part of the question i.e. whether recovery of subsidised value from employees for providing canteen facility would amount to supply under the CGST Act, is taken up. It is the contention of the Applicant, that canteen has been established as required under the Factories Act. Factories Act, 1948 on providing the facility of Canteen, states as follows:- 46. Canteens. (1) The state Government may make rules requiring that in any specified factory wherein more that two hundred and fifty workers are ordinarily employed, a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herance of their business. 7.3. The term Outward supply , is defined in Section 2(83) of the CGST Act, 2017, as below: Outward Supply in relation to a taxable person, means supply of goods or services or both, whether by sale, transfer, barter, exchange, license, rental, lease or disposal or any other mode, made or agreed to be made by such person in the course or furtherance of business . Thus supply made by a taxable person in the course or furtherance of business is an Outward supply . It has been brought out above, that establishing canteen is in the furtherance of business of the Applicant. Thus, the provision of food in the canteen for a nominal cost is a Supply for the purposes of GST. Here, the Applicant has relied on a judgment of European Court of Justice regarding the issue of supply of service . We find that this judgment has no relevance as case in hand is dealt in Indian laws. 7.4. It was also the contention of the Applicant that the amount received from the employees is in the nature of reimbursement of the cost incurred by the Applicant and there is not enforceable reciprocal obligations. However, we find that as stated supra, the running of can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he cost for providing the food/beverages to their employees and a part of the cost is being collected from employees, by adopting subsidized rates. The supply of the food/beverages, although at subsidized rates, by the Applicant to their employees is certainly an activity amounting to supply of service and attracts levy of GST on that part of the consideration being charged for such supply. The supply of food by the employer, i.e, the applicant to their employees is composite supply of food held as Supply of service as per Schedule-II of the GST Act and the amount collected by the Applicant is a Consideration on which GST is liable to be paid. 7.6 Reliance was placed by the Applicant in the cases of Hon ble High Court s decision in the case of The Indian Institute of Technology, Kalyanpur, Kanpur V the State of Uttar Pradesh and Ors [1976 (38) STC 428(A11), which pertains to leviability of Sales Tax, which is not the case in hand. The other case law viz. Panacea Biotech Ltd V Commissioner of Trade Others [2012 (12) TMI 826 (Delhi High Court)], which the Applicant has relied, wherein the facts of the case are entirely different from the facts of the case in hand. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ite is a non-cash benefit attached to an office or position which is in addition to salary or wages. Generally, such perquisites being a part of the salary or Cost to Company of the employee are free of cost i.e. the employee does not pay anything additional for a perquisite. 7.10 A combined reading of the Circular and the term perquisite , we find that the intention of the Circular is to clarify that tax is not applicable on perquisite which is part of the employee agreement and which may be free of cost for the employees. Accordingly, in case where a recovery is made against a supply, even if it is subsidised, the same will be subjected to tax. We find that the benefit of the non-levy of GST could be extended only to the extent of the consideration being borne by the Applicant out of the total cost for supply of the food/Beverages, but not to the extent of the consideration being collected at the subsidized rates, by the Applicant from their employees. Thus, we hold that GST is to be levied on the amount recovered by the Applicant from the employees towards canteen provision. 8. The Applicant has referred to the rulings of various advance ruling authorities and appellate ..... X X X X Extracts X X X X X X X X Extracts X X X X
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