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TMI Blog2024 (1) TMI 703X X X X Extracts X X X X X X X X Extracts X X X X ..... n and Schedule III, which includes activities which shall be treated neither as a supply of goods or services. 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 - it is found 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 HR Manual [only one page] reproduced supra. In view of the foregoing, we hold that 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. Valuation of GST - HELD THAT:- Since the answer to the above is not in the affirmative, the ruling sought in respect of the second question is rendered infructuous. Whether the Company is eligible to take the ITC for the GST charged by the CSP for ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounts the canteen expense basis the invoice raised by the CSP in its statement of profit and loss account. Further, the amount collected by the applicant from its employees, is credited to the expense account in which the canteen expenses are booked. 6. The applicant further states that GST should not be applicable on the amount representing the employee s portion of canteen on the following grounds viz In order to constitute a supply , the following elements are required to be satisfied: there should be supply of goods and/ or services ; supply is for a consideration ; supply is made in the course or furtherance of business ; the activity under consideration shall not fall within the scope of section 7(2) of the CGST Act, 2017 (i.e. Schedule III to the CGST Act. 2017). that any activity which is listed under Schedule III to the CGST Act. 2017 would not be considered as supply under the GST law; In terms of press release dated 10.7.2017 , supply by employer to the employee, in terms of contractual agreement entered into between the employer and the employee, will not be subjected to GST; as per circular no. 172/04/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing questions viz (i) Whether the subsidized deduction made by the applicant from the employees who are ultimate recipient of canteen facility provided in factory/corporate office would be considered as supply under the provisions of section 7 of the CGST Act, 2017 and the GGST Act, 2017? (ii) If the answer to the above is affirmative, the value at which the GST is payable ? (iii) Whether the Company is eligible to take the ITC for the GST charged by the CSP for canteen services, where the canteen facility is mandatory in terms of section 46 of the Factories Act, 1948. 8. Personal hearing was held on 9.11.2023 wherein Shri Mihir Deshmukh, Advocate along with Shri Inder Jeet, Manager (Tax) of the applicant appeared and reiterated the facts as stated in the application. On being asked they informed that they employ around 1500 employees. They sought some time to submit additional submission in the matter. Thereafter, vide their letter dated 16.11.2023, the applicant informed that they have posed the questions on which ruling is sought is only in respect of permanent employees i.e. employees who are on the payroll of the applicant. Further, the applicant submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; 1 [(aa) the activities or transactions, by a person, other than an individual, to its members or constituents or vice-versa, for cash, deferred payment or other valuable consideration. Explanation -For the purposes of this clause, it is hereby clarified that, notwithstanding anything contained in any other law for the time being in force or any judgment, decree or order of any Court, tribunal or authority, the person and its members or constituents shall be deemed to be two separate persons and the supply of activities or transactions inter se shall be deemed to lake place from one such person to another;] (b) import of services for a consideration whether or not in the course or furtherance of business; 2 [and] (c) the activities specified in Schedule I. made or agreed to he made without a consideration; 3 [*****] (d) 4 [****]. 5 [(1A) where certain activities or transactions constitute a supply in accordance with the provisions of sub-section (1), they shall he treated either as supply of goods or supply of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CBIC s press release dated 10.7.2017 Another issue is the taxation of perquisites. It is pertinent to point out here that the services by an employee to the employer in the course of or in relation to his employment is outside the scope of GST (neither supply of goods or supply of services). It follows therefrom that supply 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 Further, the input tax credit (ITC) scheme under GST does not allow ITC of membership of a club, health and fitness centre section 17 (5) (b) (ii) It follows, therefore, that if such services are provided free of charge to all the employees by the employer then the same will not be subjected to GST provided appropriate GST was paid when procured by the employer. The same would hold true for free housing to the employees, when the same is provided in terms of the contract between the employer and employee and is part and parcel of the cost-to-company (C2C). Circular No. 172/04/2022-GST S.No Issue Clarification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the employee are in lieu of the services provided by employee to the employer in relation to his employment. It follows there from 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. 12. The facts having been enumerated supra we do not intent to repeat the same for the sake of brevity. Canteen 13. The first issue to be decided is whether the deduction of nominal amount made by the applicant from the employees who are availing food in the factory premises would be considered as a supply under the provisions of section 7 of the CGST Act, 2017. Now, in terms of Section 7 of the CGST Act, 2017, 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 exception being Schedule I, which includes the activities made or agreed to be made without a consideration and Schedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e (iii) of clause (b) of Section 17(5) of the GGST Act, 2017 is applicable to the whole of clause 17(5)(b), ibid. 17. In view of the foregoing, we hold 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 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. 18. 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. 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/ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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