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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 ..... AR/R/2022/38 dated 10.08.2022. 3. Briefly, the facts are enumerated below for ease of reference: * the appellant is engaged in the manufacture, sale & distribution of pharma products and is registered with the department; * the appellant has appointed a CSP [Canteen Service Provider]; * the appellant provides subsidized canteen facilities to its employees & contractual workers; * the appellant recovers 50% of the amount from the employees; * that as far as security service contract workers is concerned, the canteen service provider raises bill for only 50% of the amount as the rest of the amount is being directly paid by the individual workers to the service provider. 4. In view of the foregoing facts, the appellant had sought 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 m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no mandate that the appellant is required to provide canteen facility to the contractual worker; * that since providing canteen facility to contractual workers is not obligatory, ITC is blocked in terms of section 17 (5) of the CGST Act, 2017. 6. The GAAR, vide the impugned ruling dated 10.08.2022, held as follows: RULING 1. GST, at the hands of M/s Troikaa, is not leviable on the amount representing the employees portion of canteen charges, which is collected by M/s Troikaa and paid to the Canteen service provider. 2. GST, at the hands of M/s Troikaa, is leviable on the amount representing the contractual worker portion of canteen charges, which is collected by M/s Troikaa and paid to the Canteen service provider. 3. ITC on 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the contractor does not comply with statutory regulation, the company will have to undertake the same. 2. Our contract with a contractor named Tirupati Enterprise wherein para 17 clearly mentions that if the contractor does not comply with statutory regulation, the company will have to undertake the same. 3. Our contract with a contractor named Samraat Dun wherein para 20 clearly mentions that if the contractor does not comply with statutory regulation, the company will have to undertake the same. Hence, in view of the above, we again would like to reiterate and draw your kind attention towards following: * Troikaa is under legal obligation to provide canteen facilities even to its contractual employees through these contracts 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicable to the contractor from time to time and maintain the necessary documents/records and submit to concern Authorities. 16. The contractor shall make all the statutory deductions from the salary/wages payable to the workers towards ESIC, PF, Labour Welfare Fund and professional tax etc as may be applicable from time to time and submit a copy of the certificate proof that all the statutory dues including ESIC and PF has been paid by him in time. Statement of such deductions and payments made shall be submitted along with the contractor's monthly bill. 17. The company will not in any way be responsible for non-compliance of any labour laws, applicable to the contract employees. If the company is required to make any payments under 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 variou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntractor within the time prescribed therefor, such amenity shall be provided by the principal employer within such time as may be prescribed. (2) All expenses incurred by the principal employer in providing the amenity may be recovered by the principal employer from the contractor either by deduction from any amount payable to the contractor under any contract or as a debt payable by the contractor. 21. Responsibility for payment of wages.- (1) A contractor shall be responsible for payment of wages to each worker employed by him as contract labour and such wages shall be paid before the expiry of such period as may be prescribed. (2) Every principal employer shall nominate a representative duly authorised by him to be present 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng so, 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 will not be subject to GST. Further, the clarification at serial no. 3 of the said circular dated 6.7.2022, regarding availment of ITC, would also not be applicable since it is available only in respect of the goods supplied to the employees of the appellant in terms of section 46 of the Factories Act, 1948, which mandates provision of canteen facilities to the employees. Further, in terms of clause 17 of the agreement, appellant also indemnifies himself for any payment made on behalf of the contractor. 17. The GAAR has dealt with the issue in depth in the paragraphs mentioned above. Nothing new is produced before us forcing us to interfere with the impugned ruling. 18. We therefore, uphold the impugned ruling dated 10.8.2022. 19. In view of the foregoing, we reject the appeal filed by appellant M/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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