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TMI Blog2025 (3) TMI 360X X X X Extracts X X X X X X X X Extracts X X X X ..... the amenity; and [b] the responsibility shifts on the principal employer ie appellant in case of the contractor is not providing the same. However, one cannot ignore the fact that the section also states that all expenses incurred by the principal employer in providing such amenity may be recovered from the contractor either by deduction from any amount payable under any contract or as a debt payable by the contractor. The appellant in his averments assumes of a situation wherein he is thrusted with the responsibility as a primary employer, which would arise only in case the contractor fails in his statutory obligation. The assumption so made is not supported by factual evidence - the contractor has been paid the gross amount which includes salary, allowances such as canteen facility, provident fund, etc. The clarification at serial no. 5, vide circular no. 172/4/2022-GST dated 6.7.2022 relied upon by the appellant to aver that no GST amount is leviable on the amount recovered from contractual workers for canteen services, fails since the clarification states that perquisites provided by the employer to its employees in terms of contractual agreement entered into between them wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ught Advance Ruling on the following questions, viz: 1. Whether GST shall be applicable on the amount recovered by the company, Troikaa Pharmaceuticals Limited, from employees or contractual workers, when provision of third-party canteen service is obligatory under section 46 of the Factories Act, 1948? 2. Whether input tax credit of GST paid on food bill of the Canteen Service Provider shall be available, since providing this canteen facility is mandatory as per the Section 46 of the Factories Act, 1948? 5. Consequent to hearing the applicant, the Gujarat Authority for Advance Ruling [GAAR], recorded the following findings viz * that in terms of the circular No. 172/4/2022-GST dated 6.7.2022, the benefit provided by employer to its employees in terms of contractual agreement is not supply; * that in terms of section 17 (5) (b), ITC is available on GST paid where it is obligatory to provide a benefit by an employer to an employee; that the said sub-section read with the clarification issued vide circular No. 172/4/2022-GST dated 6.7.2022, ITC of the GST paid on canteen charges is available to the applicant on the goods supplied to the employees of the applicant as it is ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GST paid on canteen facility is admissible to M/s Troikaa under Section 17 (5)(b) of CGST Act on the food supplied to employees of the company subject to the condition that burden of GST have not been passed on to the employees of the compny. 4. ITC on GST paid on canteen facility is not admissible to M/s Troikaa under Section 17 (5)(b) of CGST Act on the food supplied to contractual worker supplied by labour contractor. 7. Being aggrieved by the impugned ruling i.e. denial of ITC on canteen services provided by the appellant to contractual workers and levy of GST on food charges recovered from contractual workers, the appellant is before us, raising the following contentions, viz * the GAAR did not give the appellant an opportunity of being heard and hence there is violation of natural justice; * that in terms of clarification at issue no. 3 vide circular dated 6.7.2022 & Schedule-III of the CGST Act, 2017, the appellant is eligible for ITC on canteen services as it is under legal obligation; that no GST amount is leviable on the amount recovered from contractual workers for canteen services, respectively; * that while relying on section 16 of the CLRA, 1970, the authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts read with relevant provisions of Contract Labour (Regulation and Abolition) Act 1970 (CLRA) along with Factories Act, 1948. The said relevant provisions are already mentioned in our submission. * Employees has not been defined anywhere in GST however GST circular 172/04/2022 at issue 3 clearly mentions that 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. Now, while referring to any law for the time being in force, employees should also be considered as referred to in that law. Now, the relevant provisions of Contract Labour (Regulation and Abolition) Act 1970 (CLRA) along with Factories Act, 1948 clearly mentions the obligation towards all employees / workers, whether regular or contractual. Hence, there is absolute employer - employee relationship making Troikaa under obligation to provide canteen facilities to all of its employees including contractual employees. * We are attaching the relevant provisions of CLRA Act and Factories act which have already been included in our submission. * We have already mentioned our d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder any statutory regulations on behalf of the contractor / due to non compliance or failure of the contractor, the company shall deduct the same from the amount payable to the contractor, during the period of contract or thereafter. 19. Be it clearly understood and agreed that by this deed, no relationship of the employer and employee is created between the company and the workers engaged by the contractor. 10. We have carefully gone through and considered the appeal papers, written submissions filed by the appellant, submissions made at the time of personal hearing, the impugned ruling, additional submissions made post hearing and other materials available on record. 11. Before dwelling on to the issue, we would like to reproduce relevant portions of GST Act and circular/clarification for ease of reference viz * CENTRAL GOODS AND SERVICES TAX ACT, 2017 Section 17. Apportionment of credit and blocked credits.- (5) Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (1) of section 18, input tax credit shall not be available in respect of the following, namely:- (b) [the following supply of goods or services or both- (i) food and bevera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Goods or services which are obligatory for an employer to provide to its employees, under any law for the time being in force." 3. Accordingly, it is clarified 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. Perquisites provided by employer to the employees as per contractual agreement 5. Whether various perquisites provided by the employer to its employees in terms of contractual agreement entered into between the employer and the employee are liable for GST? 1. Schedule III to the CGST Act provides that "services by employee to the employer in the course of or in 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 follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the time of disbursement of wages by the contractor and it shall be the duty of such representative to certify the amounts paid as wages in such manner as may be prescribed. (3) It shall be the duty of the contractor to ensure the disbursement of wages in the presence of the authorised representative of the principal employer. (4) In case the contractor fails to make payment of wages within the prescribed period or makes short payment, then the principal employer shall be liable to make payment of wages in full or the unpaid balance due, as the case may be, to the contract labour employed by the contractor and recover the amount so paid from the contractor either by deduction from any amount payable to the contractor any contract as a debt payable by the contractor. Relying on sections 20 (2) and 21 (2), it is averred that though statutorily it is the contractor who is required to provide the amenity to the contractual workers in terms of section 16, ibid, the onus shifts on the principal employer i.e. the appellant in case the contractor is not providing the same. Two things are therefore clear [a] that statutorily it is the contractor on whom the CLRA Act has entrusted th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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