9911796707
TMI Blog2024 (2) TMI 848X 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 exception being Schedule I, which includes the activities made or agreed to be made without a consideration and Schedule III, which includes activities which shall be treated neither as a supply of goods or services. The applicant s case is that they employ more than 250 employees who have been provided with canteen facility in terms of section 46 of the Factories Act, 1948. 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 is 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 copy of the Meal Policy. In view of the foreg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is further held that the ITC on GST charged by the CSP will be restricted to the extent of cost borne by the applicant only - Input Tax Credit will be available to the applicant 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 CSP will be restricted to the extent of cost borne by the applicant only. The recovery of amount from such employees/worker on account of third party canteen services provided by the applicant to employees of SMC on deputation, employees of MSIL on business travel and temporary workers [including team lease employees who are on third party roll working within the factory premises] would fall within the ambit of the definition of outward supply as per section 2(83) of the CGST Act, 2017 and therefore, is liable to tax as a supply under GST. However, in terms of section 17(5)(b)(i), ITC is restricted in respect of supply of food and beverages. Thus, the applicant is not eligible for ITC in respect of the GST charged by the CSP for the canteen facilities provided to employees on deputation, employees on business travel and temporary/co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acilities to its employees in terms of the Meal Policy dated 1.4.2016. Article-1 of the policy specifics the objective as under: "To provide hygienic meal to all employees of SMG as well as to SMC employees who are on deputation/business travel and to regulate this provision for other visitors. Tor the purpose of this policy meal shall signify tea and breakfast in the morning lunch/dinner followed by tea in the second half of the work day". The applicant is providing canteen facilities to: * their employees; * employees of Suzuki Motors Corporation (for short-'SMC') on deputation; * employees of Maruti Suzuki India Limited (for short-'MSIL') on business travel; * temporary workers including team lease employees, who are on third party roll working within the factory premises. In the case of their employees, employees of SMC and employees of MSIL, 30% cost is borne by such employees while the applicant bears 70% of the cost. In the case of temporary workers, the applicant bears 70% of the cost. 8. The CSP is issuing tax invoices to the applicant and charging GST @ 5%. The applicant is raising monthly invoice and charging 5% GST on the nominal a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt further relies on the * ruling of the Madhya Pradesh Appellate Authority for Advance Ruling in M/s Bharat Oman Refineries Ltd. 2021-TIOL-36-AAAR-GST; * ruling of the Haryana Authority for Advance Ruling in M/s Rites Limited 2022-VILL-283-44R; * Bombay High Court judgement in the case of Bai Mumbai Trust and Ors' 2019 (9) TMI 929; * ruling of GAAAR in the case of M/s. Amneal Pharmaceuticals Pvt. Ltd 2021 (9) TMI 1293; * ruling of GAAR in the case of M/s Dishman Carbogen Ameis Ltd. 2021 (8) TMI 836; * ruling of GAAR in the case of M/s Cadmach Machinery Pvt. Ltd. 2022 (4) TMI 1337, & * M/s Emcure Pharmaceuticals Limited 2022 (1) TMI 186; * the applicant merely allows the CSP to use the canteen area in the factory premises for serving food to the employees and makes payment to the CSP on behalf of the employees for administrative convenience; * that the employment agreement between the applicant and employee is for receipt of employment services during the course of employment and not for providing the canteen service by the applicant to the employees. * the applicant submits that the basic requirements of qualifying as a 'supply' under GST are not s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he course and furtherance of business; * that under section 46 of the Factories Act, the applicant is mandated to provide the canteen facility to the workers working within the factory premises; * that they are entitled to avail ITC of GST paid to the CSP by virtue of the proviso to section 17(5)(b) & 16(1) of the CGST Act; * in this regard, they wish to rely on the following rulings * GAAR Ruling in M/s Troikaa Pharmaceuticals Limited 2022 (9) TMI 200, ibid; * Bharat Oman Refineries Limited, ibid 2021-TIOL-36-AAAR-GST; * M/s Cadila Pharmaceuticals Limited 2023 (4) TMI 298; * M/s. AIA Engineering Limited 2023 (4) TMI 297; * Tata Motors Limited. 2023 146 taxmann.com 356 (AAAR Gujarat); * thus in light of the above, the applicant is eligible to avail ITC in respect of the GST paid on canteen services used for providing canteen facility to its employees as such input service is used in the course or furtherance of business of the applicant. 12. On the third issue regarding admissibility of ITC in respect of canteen facility provided to employees on deputation and business travel and temporary workers, the applicant has made the following submission viz * that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pment is in course or furtherance of business and hence, ITC is eligible on such utensils and equipment. 14. In view of the foregoing, the applicant has filed this application for advance ruling raising the following questions viz 1) Whether GST is liable to be discharged on the portion of the amount recovered by the applicant from its employees towards the canteen facilities provided to them? 2) Whether the applicant is eligible to avail input tax credit in respect of the GST charged by the canteen service provider for the canteen facilities provided to its employees? 3) Whether the applicant is eligible to avail input tax credit in respect of the GST charged by the canteen service provider for the canteen facilities provided to employees on deputation and on business travel and temporary workers? 4) Whether applicant is eligible to avail input tax credit in respect of the inputs i.e. equipment and kitchen utensils utilized for providing canteen facilities to its employees? 15. Personal hearing was held on 9.11.2023 wherein Ms. Priyanka Kalwani, Advocate and Shri Rajesh Meharchandani, AGM (Taxation) of the applicant appeared and reiterated the facts as stated in the appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submissions made during the course of personal hearing. We have also considered the issue involved, the relevant facts & the applicant's submission/interpretation of law in respect of question on which the advance ruling is sought. 19. Before adverting to the submissions made by the applicant, we would like to reproduce the relevant sections, circular, press release etc., for ease of reference: • Section 7. Scope of supply.- (1) For the purposes of this Act. the expression "supply" includes- (a) all forms of supply of goods or 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: [(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 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mixed supply: (ii) membership of a club, health and fitness centre: and (iii) travel benefits extended to employees on vacation such as leave or home travel concession: 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.] [18. by s. 9 of The Central Goods and Services Tax (Amendment) Act, 2018 (No. 31 of 2018) - Brought into force w.e.f. 01st February, 2019] * CBICs 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relation to his employment" will not be considered as supply of goods or services and hence GST is not applicable on services rendered by employee to employer provided they are in the course of or in relation to employment. 2. Any perquisites provided by the employer to its employees in terms of contractual agreement entered into between the employer and the employee are in lieu of the services provided by employee to the employer in relation to his employment. It follows therefrom 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. 20. The facts having been enumerated supra we do not intent to repeat the same for the sake of brevity. Canteen 21. The first issue to be decided is whether the deduction of nominal amount made by the applicant from the employees who are availing canteen facilities 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 ibid, supply means all forms of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they are working in the company on account of either deputation or through a contract. The other employees are present in the factory premises on account of business travel. These workers are not 'employee' as they are not on the pay roll of the applicant. 25. The term 'contract labour' under Contract Labour (Regulation and Abolition) Act, 1970 ("CLRA") means a person who is hired in or in connection with the work of an establishment by or through a contractor. It is important to note that the word 'hire', as used in the Act, has a significant connotation and it is not equivalent to an employer-employee relationship. A person, is deemed to have been employed as contract labour when he is hired in or in connection with a particular work of the principal employer. Where a person is 'hired' specifically for the work of an establishment, his scope of work does not extend beyond the work of that establishment and he is considered to be a contract labour. 26. Section 46 of the Factories Act, 1948 stipulates the workers who are employed in the company's pay roll and not contractual workers or workers on deputation or on business travel. Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meaning. The Law Lexicon says that the word 'employed' means engaged or occupied in the performance of work or hired to perform labour. Contractor pays the salary to the temporary/contractual worker. In respect of workers on deputation/business travel also it is not the claim of the applicant that they pay the salary that these workers are on their pay roll. These workers are supplied by the contractor to the applicant for carrying out activity in the factory premises. CBIC vide its Circular No. 172/04/2022-GST dated 6.7.2022 has 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 is provided in terms of the contract between the employer and employee. In the present case contractual agreement is between contractor and contract workers being employer and employee respectively. Likewise, there is no contract between employees on deputation, employees of others/sister concern on business travel with the applicant. Further, the test for establishing an employer-employee relationship as laid down by the Apex Court in Balwant Rai Saluj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny local authority in which they are engaged as public authorities: From the plain reading of the definition of "business", it can be safely concluded that the supply of food by the applicant to its contractual worker, employees of SMC on deputation, employees of MSIL on business travel, would definitely come under clause (b) of section 2(17) as a transaction incidental or ancillary to the main business as the contractual worker are working for the company to run the business activity of the applicant. 33. Schedule II to the CGST Act, 2017, describes the activity to be treated as supply of goods or supply of services. As per clause 6 of the Schedule, the following composite supply is declared as supply of service: 6. Composite supply The following composite supplies shall be treated as a supply of services, namely. - (a) works contract as defined in clause (119) of section 2; and (b) supply, by way of or as part of any service or in any other manner whatsoever, of goods. being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oll working within the factory premises] would fall within the ambit of the definition of 'outward supply' as per section 2(83) of the CGST Act, 2017 and is therefore, liable to tax as a supply under GST. Input Tax Credit (ITC) [in respect of permanent employees of applicant] 37. The next question on which the applicant has sought ruling is whether ITC of GST charged by the CSP can be availed by the applicant. In this connection, before proceeding further, certain factual aspects which we would like to mention, though at the cost of repetition are viz * that they employ more than 250 employees; * that section 17(5)(b) ibid, was amended on 1.2.2019, and is reproduced supra', * that the applicant is mandated vide section 46 of the Factories Act, 1948 to provide canteen facility to its employees within the factory premises; * that circular No. 172/4/2022-GST clarifies that post substitution, effective from 1.2.2019, based on the recommendation of the GST Council in its 28th meeting, the proviso after sub-clause (iii) of clause (b) of Section 17(5) of the CGST Act, 2017 is applicable to the whole of clause 17(5 )(b), ibid. 38. In view of the foregoing, we hold t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y are obligated under the terms of the agreement to provide the CSP with kitchen utensils and equipment like watercooler, dishwasher, plates, worktable, table etc.; that on termination, the CSP shall vacate the premises, hand over all the kitchen utensils and equipment; that ownership of the kitchen utensils and equipment always remains with the applicant; that the inward supply of kitchen utensils and equipment is in course or furtherance of business and hence, ITC is eligible on such utensils and equipment. 42. We have already held that the nominal amount deducted by the applicant from their permanent employees who are availing food at their canteen is neither a supply of goods nor service in terms of section 7, ibid. In this background, the aforementioned submission needs to be examined. 43. Section 17(2) and 17(3), states as follows: Section 17. Apportionment of credit and blocked credits- (1) ................ (2) Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said ..... X X X X Extracts X X X X X X X X Extracts X X X X
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