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TMI Blog2024 (6) TMI 226X X X X Extracts X X X X X X X X Extracts X X X X ..... hen Ruling was 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. - SH. MAHENDRA RANGA, AND DR. RAVI KUMAR SURPUR, MEMBER Present for the Appellant : Shri Vikash Agarwal, CA, Authorized Representative (Proceedings under Section 101 of the Central GST Act. 2017 read with Section 101 of the Rajasthan GST Act, 2017) At the outset. we would like to make it clear that the provisions of both the Central GST Act, 2017 and the Rajasthan GST Act, 2017 are Pari materia barring a few exceptions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central GST Act, 2017 would also mean a reference to corresponding provisions of Rajasthan GST Act. 2017. The present appeal has been filed under Section 100 of the Central Goods Service Tax Act, 2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 be entertained only if the supply of goods or services or both being undertaken or proposed to be undertaken by the Appellant themselves. In this case, the supplies of Services are being undertaken or proposed to be undertake ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e given only fora proposed transaction, whereas under GST, advance ruling can be obtained for a proposed 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 be filed. Thus, the Appellant has rightly filed the advance ruling. A. The AAR erred in concluding that the Applicant (now Appellant) are not a supplier in the present case and are only a receiver of services supplied by the canteen service provider A.1 The AAR under Paragraph 12 of the impugned O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Supply under CGST Act and its applicability there of. 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 in the matter of M/s Amneal Pharmaceuticals Pvt. Ltd. [TS-569-AAAR(GUJ)-2021-GST] wherein the Ruling of AAR was modified, and it was ruled that no GST is to be levied on third-party canteen charges collected by employer from employee. B.6 The Appellant placed reliance on the decision of Karnataka Authority for Advance Ruling in the case of M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst 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 Mumbai Trust, Vithaldas Laxmidas Bhatia, Smt. Indu Vithaldas Bhatia vs. Suchitra [Commercial Suit (I) 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 nominal amount from their employee s salary as a recovery of expenses under employment relationship without any commercial objective and only to maintain discipline and prevent wastage of food and resources. The same is also shown as a deduction in the salary slip provided to the employees. The Appellant submitted that there is no reciprocity of any activity or transaction i.e. quid-pro-quo between the App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 recovered towards Top-up and parental insurance premium from the employees does not amount to a supply of any service under Section 7 of the Central Goods Service Tax Act. 2017. B.30 Further reliance has been placed on decision in the case of Posco India Pune Processing using Center Private limited [GST-ARA-36/2018-19/B-110] dated 7 September 2018] in a similar matter as above. B. 31 the Appellant submitted that similar Ruling has been passed in the case of M/s Jotun India Pvt ltd. (2019 (10) TMI 482] by the Authority f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ession: Provided that the input tax credit in respect of such goods or services or both shall be available, where it is obligator 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) or Section 17 of the CGST Act is applicable to the whole of clause (h) of sub-Section (5) of Section 17 of the CGST Act. Accordingly, it is clarified that the proviso alter sub-clause (iii) of clause (h) of sub-Section(5) of Section 17 of the CGST Act is applicable to the whole of clause (h) of sub-Section (5) of Section 17 of the CGST Act. C.3 In this regard, the Appellant reiterated the fact that they are a Company engaged in the manufacture, supply and distribution of automotive components used in two three/four-wheeler automobiles. As per Section 46 of the Factories Act, 1948, in any specified factory wherein more than 250 workers are ordinarily employed, a canteen or canteens, shall be provided and maintained by the Occupier for the use of the workers. In Section 2 (n) of the Fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... employees? II. Whether GST would he 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 Punjabi Flavourz Catering Service (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 salaries on a monthly basis and at fix rate opting for availing food facility in Canteen. A part of the cost of the meals provided to contractual workers is recovered from contractor. The Appellant are paying GST against supply of canteen service on recovery basis since July 2017. We further note that the Appellant have provided copies of two contracts made by them with M/s Punjabi Flavourz Catering Service( the Canteen Service Provider ) one is made for the period 16.01.2020 to 15.01.2022 and second one is made for the period 16.01.2022 to 15.01.2024 and whereas application seeking advance ruling was m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 said that the transaction being undertaken by the appellant falls within the purview of definition of Advance Ruling prescribed under Section 95 of the CGST Act. (iii) the Central Board of Indirect Taxes and Customs (hereinafter referred to as the CBIC ) 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. (iv) they placed reliance on Advance Rulings pronounced by the Appellate Authority for Advance Ruling, Rajasthan in the matter of M/s Shri V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22 to 15.01.2024. The application was filed on 11.03.2022. Each 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 concluded can be covered. (ii) Proposed to be undertaken - There is no doubt about supplies which are yet to commence as these are without any doubt covered by the AR mechanism. Therefore, we hold that the Authority for Advance Ruling, Rajasthan has erred in not pronouncing the Ruling on Merits. 19. We observe that AAR Rajasthan have not taken note of the above contract furnished by the appellant for the period from 16.01.20022 to 16.01.2024, which was valid during the period when Ruling was pronounced. 20. We feel that it will be in the fitness of things if the Authority for Advance Ruling re-consider whole application dated 11.03.2022 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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