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TMI Blog2024 (7) TMI 981X X X X Extracts X X X X X X X X Extracts X X X X ..... will not be subjected to GST when the same are provided in terms of the contract between the employer and employee - The deduction of nominal amount made by the applicant from the salary of the employees who are availing the facility of food provided in the factory premises would not be considered as a Supply' under the provisions of section 7 of the CGST Act, 2017. Whether Input Tax Credit of GST charged by the CSP would be eligible for availment to the extent of cost borne by the applicant? - HELD THAT:- The Input Tax Credit will be available to the applicant 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 employees working at the factory is concerned. It is further held that the ITC on GST charged by the canteen service provider will be restricted to the extent of cost borne by the applicant only - 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 cantee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxable under GST only if such amount qualifies as 'consideration' towards supply as defined u/s 7 of the CGST Act, 2017; that in terms of Schedule-Ill, services by an employee to employer in the course of or in relation to his employment, is not treated as a supply of goods/services; that any consideration by the employer to the employee on account of the activities undertaken under the contract of employment is out of the scope of GST: that an activity undertaken in the course of an employment relationship would be outside the scope of GST; that in terms of circular no. 172/04/2022-GST dated 6.7.22, it is clarified that any perquisite provided to employees as part of employment contract is not subject to tax under GST; that the applicant provides canteen facility in terms of contractual agreement entered between the employer and employee; that the contractual agreement specifically provides for availment of benefits and allowances which includes canteen services to employees; that in terms of section 7, ibid, the below mentioned criteria plays a crucial role to determine GST implications viz,- that there should be a legal intention of both parties to supply receive the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the same to its employees under the law; that they would like to rely on the below mentioned rulings/circular which substantiate their averment that applicant is eligible to avail ITC on input service of canteen;- Circular no. 172/04/2022-GST dtd 6.7.2022; M/s Bharat Oman Refineries reported at 2021-TIOL-36-AAAR-GST: M/s Hindustan Coca Cola Beverages Pvt. Ltd. v/s CCE-Appeal No. E/89199/2013 E/85728/2014; Cerna Electric Lighting Products India Private Limited Vs. CCE. Appeal No. E/787/2012, reported in 2015 (37) STR 718 (Guj.); M/s Tata Motors Limited [GUJ/GAAAR/APPEAL/2022/23]; M/s. Cadila Pharmaceuticals Ltd [GUJ/GAAR/R/2023/14]; TATA Autocomp Systems Ltd [GUJ/GAAR/R/2023/23] 7. In view of the foregoing, the applicant has filed this application, seeking advance ruling on the below mentioned questions viz i. Whether the deduction of a nominal amount by the Applicant from the salary of the employees who are availing the facility of food provided in the factory premises would be considered as a Supply of Service by the Applicant under the provisions of Section 7 of Central Goods and Service Tax Act, 2017 and Gujarat Goods and Service Tax Act, 2017? ii. In case answer to above is y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or agreed to he made without a consideration; [****] (d) [****] [(1A) where certain activities or transactions constitute a supply in accordance with the provisions of sub-section (1), they shall be treated either as supply of goods or supply of services as referred to in Schedule II] (2) Notwithstanding anything contained in sub-section (1), - (a) activities or transactions specified in Schedule III; or (b) such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council, shall be treated neither as a supply of goods nor a supply of services. (3) Subject to the provisions of 6[sub-sections (1), (1A) and (2)]. the Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as - (a) a supply of goods and not as a supply of services; or (b) a supply of services and not as a supply of goods. Section 17. Apportionment of credit and blocked credits.- [relevant extracts] 5) Notwithstanding anything contained in sub-section (1) of section 16 and sub-section ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is applicable to the entire clause (b) or the said proviso is applicable only to sub-clause (iii) of clause (b)? 1. Vide the Central Goods and Service Tax (Amendment Act) 2018, clause (b) of Sub-section (5) of section 17 of the CGST Act, was substituted with effect from 01.02.2019. After the said substitution, the proviso after sub-clause (iii) of clause (b) of sub-section (5) of section 17 of the CGST Act provides as under: 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. 2. The said amendment in sub-section (5) of section 17 of the CGST Act was made based on the recommendations of GST Council in its 28th meeting. The intent of the said amendment in sub-section (5) of section 17, as recommended by the GST Council in its 28th meeting, was made known to the trade and industry through the Press Note on Recommendations made during the 28th meeting of the GST Council, dated 21.07.2018. It had been clarified that scope of input tax credit is being widened, and it would now be made available in respect of Goods or servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided with canteen facility in terms of section 46 of the Factories Act, 1948. The applicant's primary role is that he provides a demarcated space and that the amount is paid by him to the CSP [a part of which is collected from the employees] on behalf of the employees. 14. 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 are provided in terms of the contract between the employer and employee. We find 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 copy of the HR policies for canteen facility to employees wherein it is stated as follows:- Policy Highlights a. This policy gives the guidelines for the canteen facilities provided to the employees of the company. b. Subsidized canteen facility will be provided to all employees of the company as per this policy guidelines at Gujarat (Mehsana) location. c. The cost of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry; 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 to provide canteen facility to its employees; 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. 17. In view of the foregoing, we hold that Input Tax Credit will be available to the applicant 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 employees working at the factory is concerned. It is further held that the ITC on GST charged by the canteen service provider 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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