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TMI Blog2024 (6) TMI 224X X X X Extracts X X X X X X X X Extracts X X X X ..... erms 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. The deduction made by the applicant from the employees who arc availing food in the factory would not be considered as a supply under the provisions of section 7 of the CGST Act, 2017. Whether GST is liable to be discharged on the transportation facility provided by Applicant to its employees? - 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 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. Whether the Applicant is eligible to avail input tax credit of the GST charged by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- per month per employee from contractors/manpower supply company respectively along with GST at the rate of 5% under SAC 9963. The remaining cost of the meal is borne by the applicant. 6. The applicant has attached the Purchase Order issued to the CSP as Annexure 1, Canteen Policy as Annexure 2, a sample copy of the tax invoice issued by CSP as Annexure 3 and a sample copy of the tax invoice raised by the applicant for discharging tax on the total amount paid to the CSP as Annexure 4 with their application. 7. The applicant s contention is that the canteen facility provided to their employees is not in the nature of supply u/s 7 of the CGST Act, 2017 hence would not be leviable to GST owing to the following reasons viz that the canteen facility is provided in terms of the company policy and thus, a perquisite provided by an employer to its employees in the course of employment; that it is not provided in the course of furtherance of business; that there is no quid-pro-quo and no intention to undertake the business of providing canteen facilities; that the recovery made from employees is ultimately paid to the CSP; that they would like to rely on the below mentioned rulings/circul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... des transportation facility to the following types of employees, who are on the payroll of the applicant. Management employees (Executive, Assistant Manager, Manager. Head of Department etc.) Staff (Plant Operator, Electrician, Boiler Attendant etc. which arc called blue collar employees). 9. The applicant is discharging applicable GST under Reverse Charge Mechanism (hereinafter referred to as RCM ) on renting of motor vehicle services. For providing transportation facility, the applicant is not recovering any amount from the management employees. However, the applicant recovers a nominal amount of Rs. 75/- per month from the salary of employees falling under the category of staff. The applicant has further enclosed the transport policy as Annexure 6 with their application. 10. The applicant s contention is that the transportation facility provided to their employees is not in the nature of supply u/s 7 of the CGST Act, 2017 hence would not be leviable to GST owing to the following reasoning viz that the transport facility is provided in terms of the company policy and thus a perquisite provided by an employer to its employees in the course of employment; that the facility is made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly.- (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 constituents shall be deemed to be two separate persons and the supply of activities or transactions inter se shall be deemed to take place from one such person to another (b) import of services for a consideration whether or not in the course or furtherance of business; [and] (c) the activities specified in Schedule I, made or agreed to be made without a consideration; (d) [****]. [(1A) where certain activities or transactions constitute a supply in acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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.] 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices 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. 16. The facts having been enumerated supra we do not intent to repeat the same for the sake of brevity. Canteen 17. The first issue to be decided is whether the deduction of a 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 provision 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 Schedule III, which includes activities which shall be treated nei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 clearly 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. 20. 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 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 applicant 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 . 21. In view of the foregoing, we hold that Input Tax Credit will be available to the applicant in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foregoing, we hold that the deduction for bus transportation facility would not be considered as a supply under the provisions of section 7 of the CGST Act, 2017. 25. In the light of the foregoing, we rule as under: RULING 1. GST is not liable to be discharged on the portion of the amount recovered by the Applicant from its employees towards the canteen facility provided to the employees. 2. GST is not liable to be discharged on the transportation facility provided by Applicant to its employees. 3. 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 permanent employees, but disallowing proportionate credit to the extent embedded in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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