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TMI Blog2023 (12) TMI 723X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act, where the Authority finds that advance ruling pronounced by it under sub-section (4) of Section 98 or under sub-section (1) of section 101 has been obtained by the applicant by fraud or suppression of material facts or misrepresentation of facts, it may, by order, declare such ruling to be void ab initio and thereupon all the provisions of this Act or the rules made thereunder shall apply to the applicant as if such ruling had never been made. 5. At the outset, we would like to make it clear that the provisions of both 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, 12, Chaitanya, Khader Nawaz Khan Road, Nungambakkam, Chennai 600006 (herein after referred to as The Applicant'), are registered with GST and hold GSTIN 33AAACS4920J1ZJ. The Applicant is engaged in the manufacture and supply of die-casting parts for use in automobil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eparation operated by SACL. After the food is prepared, SACL sends the food to the Applicant's dining area within the Applicant's plant. SACL recovers charges for the canteen facility provided to the Applicant's workers and the Applicant in turn recovers subsidized amount from its workers. * They recover a subsidized amount from the workers, as given below, and the remaining cost is borne by them. Plant Location Type of worker Recovery per month/day Padi (own canteen) Regular 25 per month Trainee 25 per month Contractors Rs. 15 or 30/per day Oragadam (SACL) Regular Rs. 5 per day Trainee Rs. 5 per day Security Rs. 15 per day Contractors Rs. 30 per day Hosur (SACL) Regular Rs. 5 per day Trainee Rs. 5 per day Contractors Rs. 15 per day 2.3. In their interpretation of law/facts in respect of the questions raised, the Applicant submitted that - * The subsidized amount collected from the workers for provision of canteen facility should not attract GST under both the models * As per the scope of the term 'supply' as enumerated in Section 7(1) of the CGST Act, for applicability of GST on any transaction there should be the following ingr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parts and provision of canteen facility is not incidental or ancillary to their main business. Therefore, taxability under Schedule I also fails. * In this regard, reliance was placed on the following case laws:- i. The Indian Institute of Technology, Kalyanpur, Kanpur V the State of Uttar Pradesh and Ors [1976 (38) STC 428(All). ii. Panacea Biotech Ltd V Commissioner of Trade & Others [2012 (12) TMI 826 (Delhi High Court)] iii. Emcure Pharmaceuticals-Maharashtra AAR [AAR No. GST-ARA-119/2019-20/B-03 dated 04.01.2022] iv. Muashi Auto Parts India Pvt. Ltd. - Haryana Appellate AAR [HAAR/2020-21/06 dated 25.09.2020] v. North Shore Technologies Pvt Ltd. 2021(49) GSTL 315(AAR-GST-UP). * Subsidised food is a perquisite to employees(excluding contractors) forming a part of the wage agreement and HR policy of the Agreement; Canteen facility is provided to the employees as part of their employment with them; As per Schedule III of the CGST Act, services by an employee to the employer in course or in relation to his employment shall be treated neither as a supply of goods nor a supply of services; Reliance is placed on Circular No. 172/04/2022-GST dated 06.07.2022, wherein it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2023-VIL-106-AAR ii. Cadila Pharmaceuticals Limited - 2023-VIL-68-AAR iii. Brandix Apparel India Private Limited - 2023-VIL-63-AAR iv. Astral Limited - 2022-VIL-82-AAR v. Zydus Lifesciences Limited - 2022-VIL 260-AAR vi. Tata Autocomp Systems Limited -2023-VIL-108-AAR 3.2. The AR was asked to submit the following documents:- * Copies of agreements with the employees from 2017-18 * Sample invoices issued to Manpower supplier * Copies of books of accounts showing accounting entry in respect of staff welfare * Copies of sample consolidated invoices issued for recovery of nominal charges from the employees. * Rationale behind recovery of Rs. 5/Rs. 15/Rs. 25 per day The Applicant vide their letter dated 04.09.2023 submitted the above documents. In respect of the last point above, they submitted that the recovery is determined by way of discussion by the Management with the Worker's Union on a time to time basis. 4.1. The Applicant's jurisdictional Central Authority has submitted their remarks on the questions raised as under:- * The canteen has been established and the facility is provided as per the provisions of Section 46 of the Factories Act, 1948. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Applicant within the factory premises * Model II - Canteen run by Applicant's subsidiary company operating within common premises for which the subsidiary company recovers charges from the Applicant. It is seen that in Model I the Applicant had set up a canteen facility in their Padi factory for the benefit of its employees and workers, wherein the cook is their employee and inputs for cooking are bought by the Applicant. In Model II, operated in Oragadam and Hosur, Canteen run by Applicant's subsidiary company(SACL) operating within common premises for which the subsidiary company recovers charges from the Applicant. In both the models, a subsidised amount is collected from the employees/workers towards availing canteen facility. The clarification sought is as to whether GST is liable to be paid on that part of the amount collected from their employees towards provision of food for both the models. The contention of the applicant is that :- * There is no supply between the Applicant and the employees and the Applicant is not engaged in the business of provision of canteen services. * The amount received from the employees is in the nature of recovery and not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unchanged. 6.2. From the above, we find that Applicant provides canteen facility either by himself or through a third party 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 canteen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess. 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 runn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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. 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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. 7.11 Further, it was the contention of the Applicant that in respect of Model II, where canteen facility is provided through a third party i.e. SACL, the Applicant's role is limited to collecting the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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