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TMI Blog2024 (6) TMI 225X X X X Extracts X X X X X X X X Extracts X X X X ..... s pronounced. It will be in the fitness of things if the Authority for Advance Ruling re-consider whole application dated 11.03.2022 filed by the appellant before the Authority for Advance Ruling, Rajasthan on merits. The Ruling of AAR, Rajasthan dated 18.10.2022 is set aside and the matter is remanded back, to the AAR to decide the application afresh on merits after considering all the questions posed by the appellant in their application dated 11.03.2022. X X X X Extracts X X X X X X X X Extracts X X X X ..... vered from contractor in case of contract workers. The Appellant are paying GST against supply of canteen service on recovery basis since July 2017. 4. The AAR had to primarily decide whether the question on which Ruling is sought by the Appellant is an existing or ongoing transaction and falls within the meaning of the phrase "being undertaken" used in the definition of the term "Advance Ruling" or not, as the supply which already taken place since long back from July 2017 and continue till date. 5. The Appellant filed their application for seeking Advance Ruling on 11.03.2022 and as per submission made by them that they are paying GST since 2017. The Authority for Advance Ruling pronounced that they shall decide on matters or on questions specified in sub-Section (2) of Section 97, in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the Appellant. The authority held that Section 95 of the CGST Act, 2017 allows the authority only to decide on matters or on questions in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the Appellant i.e. in the subject case this application can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;) in flyer on Advance Rulings has clarified that under GST Advance Ruling can be obtained for a proposed transaction as well as transaction already undertaken by the Appellant. The relevant extract of the flier is reproduced below: 'Under the present dispensation, advance ruling can be given only for a propose transaction, whereas under GST, advance ruling can be obtained for a propose transaction as well as transaction already undertaken by the applicant.' 6.4 The Appellant placed reliance on Advance Ruling pronounced by the Appellate Authority for Advance Ruling. Rajasthan in the matter of M/s Shri Vinayak Buildcon (2022 (5) TMI 450, Rajasthan]. 6.5 Reliance in this regard is also placed on the Ruling pronounced in the matter of M/s KEI Industries Limited [2019 (3) TMI 1073, Rajasthan] 6.6 The Appellant submitted that in the instant case that they wish to seek clarification on (i) admissibility of input tax credit of tax paid or deemed to have been paid and (ii) determination of the liability to pay tax on goods or services or both; of Section 97 of the CGST Act, Thus, both the questions on which Advance Ruling is sought are questions on which an Advance Ruling can b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egal provisions to the present case B.2 The Appellant submitted that merely setting up of a canteen facility for the employees (to meet statutory obligation laid under Section 46 of the Factories Act, 1948) and deduction of nominal cost/charges would not tantamount to Supply under Section 7 of the CGST Act. Concept of 'Supply' under CGST Act and its applicability thereof B.3 That on perusal of Section 9 (1) of the CGST Act, it is clear that to levy tax on any activity, the activity is required to qualify as a 'Supply' in the first place. The Appellant refer to the provision of Section 7 of the said Act. Provision of canteen facility to the employees is only due to mandatory Statutory Obligation B.4 The Appellant stated that it is merely providing demarcated space for canteen facility as mandated under the provisions of the Factories Act to its employees for eating food during specified times. Further, the Appellant deduct a very nominal charge from the employees for availing the benefit of the facility provided. No GST to be levied on third-party canteen charges collected by employer from employee B.5 The Appellant relied on the recent Ruling of Gujarat AAAR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect to the definition of supply, as mentioned in Section 7 of the CGST Act, (Supra) the Appellant found it pertinent to evaluate another element of supply which states that an activity could be considered as a supply only if it is "made or agreed to be made' for a consideration. In view of the Appellant it is very critical to analyze the term "consideration" against the deduction of nominal amount from its employees' salary. B.11 The term 'consideration' has been defined in Section 2 (31) of the CGST Act, 2017. B.12 The Appellant submitted that a supply must involve enforceable reciprocal obligations. Hence, the deduction in employees' salary made by the Appellant would constitute a mere transaction in money between the Appellant and their employees. B.13 Also, the Appellant relied upon the judgement of Bombay High Court in the case of Bai Mamubai Trust, Vithaldas Laxmidas Bhatia, Smt. Indu Vithaldas Bhatia vs. Suchitra [Commercial Suit (1) No. 236 of 2017] has held that for GST to be payable on any payment, there must be the necessary quality of reciprocity to make it a 'supply'. B.14 In the instant case, the Appellant have been deducting a nomin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Cadila to its employees. Accordingly, GST is not payable by M/s Cadila on the amount representing the employees portion of canteen charges, which is collected by them and paid to the Canteen service provider. B.20 Further, they have relied on similar Ruling given by Gujarat AAR in case of M/S. Cadmach Machinery Pvt. Ltd. [2022 (4) TMI 1337]. Extension of Canteen facility to Appellant's employees in the course of employment relationship B.21 Notwithstanding anything mentioned above, the Appellant stated that Schedule III of the CGST Act which provides that "Services by an employee to the employer in the course of or in relation to his employment" shall be treated neither as a Supply of Goods nor a Supply of Services. B.22 They submitted that press release issued on 10 July 2017 by CBIC. wherein the GST implications on the services of Employer and Employee has been clarified. Para 3 of the said provides that: "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 there from that supply by the employer to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s terminated or resigns. This makes it evident that 'Employer-Employee relationship is a pre-requisite to avail the canteen facility. B.28 Reliance is also placed on the Ruling issued by the Hon'ble AAR Maharashtra in case of M/s Tata Motors Limited [GST-ARA -23/2019-20/B-46 dated 25 August 2020) therein it was held that since the Applicant (i.e. tata Motors) had not been supplying am services to its employees, in view of the provisions of Schedule-III; GST was not applicable on the nominal amounts recovered by the said Applicant from its employees for providing transportation facilities (with the same being applicable to canteen facility. It was further observed that the Applicant, in its capacity of being the employer was the recipient of the service and employees were the users of such services. The Hon'ble AAR held that by virtue of Clause 1 of Schedule-III to CGST Act 2017, GST was not applicable to the nominal amount recovered by the applicants from their employees. B.29 Further, reliance is also placed on the decision of Maharashtra AAR in the case of M/s The TATA Power Company Limited (No. GST-ARA-99/2019-20/B-92) wherein the authority has held that amounts re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cified therein, life insurance and health insurance: Provided that the input tax credit in respect of such goods or services or both shall be available where an inward supply of such goods or services or both is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or 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: Presided 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." C. 2 The Appellant submitted that in terms of the Circular No. 174/06/2022, it has also been clarified that that the proviso after sub-clause (iii) of clause (b) of sub-Section (5) of Section 17 of the CGST Act is applicable to the whole of clause (b) of sub-Section (5) of Section 17 of the CGST Act. Accordingly, ft is clarified that the proviso after sub-clause (iii) of clause (b) of sub-Section (5) of Section 17 of the CGST A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e time of personal hearing held on 07.03.2024. 9. We observe that the Appellant had sought Ruling before the Authority for Advance Ruling, Rajasthan on the following questions:- Whether the subsidized deduction made by the Appellant from the Employees who are availing food facility in the factory would be considered as a "supply" by the Appellant under the provisions of Section 7 of Central Goods and Service Tax Act, 2017 and Rajasthan Goods and Service Tax Act, 2017. (a) In case answer to above is yes, I. Whether GST is applicable on the nominal amount deducted from the salaries of their employees? II. Whether GST would be applicable on the nominal amount deducted from the Manpower supply contractor in case of contractual employees? (b) Whether Input Tax Credit ('ITC') of the GST charged by the Canteen Service Provider would be eligible for availment to the Appellant? 10. We note that the Appellant have contracted with M/s Ashri Associates (hereinafter referred to as 'the Canteen Service Provider') to operate Canteen within the Appellant's factory premises. A part of the cost of the meals provided to employees is deducted by the Appellant from their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew of advance ruling. Moreover, the Appellant filed their application before the Authority for Advance Ruling, Rajasthan on 11.03.2022 i.e. much later than the execution of contract i.e. July 2017 and Appellant are discharging their GST liability since July 2017 on canteen service supplied by them. The Appellant have asked for ruling on the transactions effected prior to the date of filing of the application before the Authority for Advance Ruling, Rajasthan with respect to supplies already being undertaken and GST being paid from 1.7.2017 onward. In view of above, the AAR, Rajasthan pronounced that the subject application for Advance Ruling made by the Appellant was not maintainable and accordingly rejected of under the provisions of the GST Act, 2017. 13. The matter was heard by the AAAR on admissibility of the appeal. 14. The Appellant have argued that:- (i) the definition meaning of the term 'ongoing' is 'continuing', 'still in progress'. In the instant case, the transaction although being undertaken since July, 2017, is still being undertaken and will be undertaken in the future also. (ii) going by the meaning of the term 'ongoing* it can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified in sub-section (2) of Section 97 or sub-section (1) of Section 100, in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant; (emphasis applied) 18. The law, therefore, covers two kinds of supplies under the purview of the AR mechanism: (i) Supplies being undertaken - meaning thereby supplies which have begun, but not concluded. Once the supply has concluded, it will cease to be covered by the term "being undertaken". It is noted that the period covered by the contract with M/s Ashri Associates is for 01.04.2021 to 31.03.2022. The application was filed on 11.03.2022. The contract covers multiple or series of supplies. Thus, supplies continuing on or after 11.03.2022 shall have the status of ongoing supplies. Thus, the activity of the appellant is covered under "Supplies being undertaken". We note that the transactions covered by the contract are in the nature of a series of supplies. One supply is followed by another supply. Thus, supplies which have been made cannot be covered by the AR mechanism. However. supplies that are ongoing and which are yet to be concluded can be covered. (ii) Proposed to be under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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