9911796707
TMI Blog2025 (4) TMI 802X X X X Extracts X X X X X X X X Extracts X X X X ..... bus transportation facility, whether the Applicant would be exempted under the Sl. No. 15 of Notification No. 12/2017-Central Tax (Rate)? Question 4: Whether input tax credit is eligible on bus transport service and canteen service procured from third party supplier to the extent the cost is borne by the Applicant? Question 5: Even if GST is payable in respect of aforesaid employee recoveries, what would be the value on which GST is payable? At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further, henceforth for the purposes of this Advance Ruling, the expression 'GST Act' would mean CGST Act and MGST Act. 1. FACTS AND CONTENTION - AS PER THE APPLICANT: 1.1 Lear Automotive India Pvt. Ltd. (hereinafter referred to as 'Applicant') is a company having its registered office at E-25, 26 & 27, MIDC, Bhosari, Pune, Maharashtra 411026 ("Bhosari Unit") and having its plant at No 629, Talegaon-Chakan Rd, Chakan, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sport Policy') wherein the Applicant will be providing quality food and refreshments to employees at subsidized rates in the company premises. 1.7 The present application is filed in respect of applicability of Goods and Services Tax (hereinafter referred to as "GST") payable on the recoveries made by the Applicant from its employees for providing the canteen and bus transportation to its employees. Canteen & Bus Transportation 1.8 The Applicant provides canteen and transportation facility to its employees at the Bhosari and Chakan Units based on the employment terms of the Applicant. Further, for providing the canteen facility to the employees, the Applicant has introduced a separate canteen policy. Based on the agreed terms between the Applicant and Employees, the Applicant is entitled to make recoveries at subsidized rates for the canteen and bus transportation facility provided by the Applicant at its factory and corporate office. The relevant clauses of the Canteen Policy are extracted below: "GUIDELINES Canteen * Employees to avail the canteen facility as per the location defined canteen registration process. * Deduction for the availed facility will be made as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and does not carry intention to undertake any kind of business activity. The said facilities are towards providing hygienic food and to maintain safety for the employees who work in the shifts as well as to maintain the continuity in manufacturing and research & development work. The factories of the Applicant are located in remote locations. It is submitted that safety for employees and more particularly female employees is very important. Hence, the Applicant provides the bus transportation facility to ensure the safety of the employees and to provide a better working environment. 1.14 Under the aforesaid circumstances, the Applicant seeks the present advance ruling to understand whether the canteen and bus transportation recoveries made by the Applicant are taxable under the GST laws and whether the transportation facility provided to the employees in Non-AC buses having contract carriage permit would be exempted from GST? Apart from the taxability, the Applicants also seeks the advance ruling with respect to the valuation of the said recoveries from the employees. The Applicant also wishes to seek the Advance Ruling with respect to the availability of ITC in respect of inpu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which reads as under: - Section 97. Application for advance ruling: (2) The question on which the advance ruling is sought under this Act, shall be in respect of, - (a) classification of any goods or services or both; (b) applicability of a notification issued under the provisions of this Act; (c) determination of time and value of supply of goods or services or both; (d) admissibility of input tax credit of tax paid or deemed to have been paid; (e) determination of the liability to pay tax on any goods or services or both; (f) whether Applicant is required to be registered; (g) whether any particular thing done by the Applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term." ... Emphasis Supplied 2.7. In view of the above, it is submitted that an advance ruling can be sought in respect of determination of the liability to pay tax on any goods or services or both by the Applicant. In the present case, the Applicant is seeking an advance ruling to determine whether the recoveries made by the Applicant from the employees for providing food and transportation facilities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icant's Interpretation with respect to the recoveries made from the employees for providing Canteen facilities to its employees are provided in the below grounds which are without prejudice to each other. 1.1 The employee recoveries for providing canteen facility and also for providing bus transportation service is not covered under the ambit of "supply" under Clause (a) of Section 7 (1) of the CGST Act. 1.1.1 In order to analyse the present issue, reference is made to Section 7 (1) of the CGST Act, which defines the term 'supply' as under: 7. (1) For the purposes of this Act, the expression "supply" includes - (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; (b) import of services for a consideration whether or not in the course or furtherance of business; (c) the activities specified in Schedule I, made or agreed to be made without a consideration; and (d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II. ....Emphasis Supplied 1.1.2 Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) any activity ancillary or incidental to the activities covered under clause (a) are also treated as business. Further, clause (c) also states that any activity or transaction falling in the above categories would be business whether or not there is volume, frequency, continuity or regularity in transactions. Hence, the above definition provides that business includes any activity in the nature of trade, commerce, manufacture, etc. 1.1.5 The Applicant reiterates that 'supply' can come into existence only when there is any activity done in the course of business or furtherance of business. It is clear from the above discussion that business means any activity in the nature of trade, commerce, manufacture, etc. 1.1.6 It is submitted that the Applicant is engaged in the business of manufacture of seats for motor vehicles and its parts. The entire business activities are aimed towards the manufacture, develop, sales, distribution, promotion of seats for motor vehicles and its parts. The Applicant also submits that while obtaining incorporation of the Applicant as a registered company under the Companies Act, the Memorandum of Association (MOA) also provides that the Applicant would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness of manufacturing, cooking, packing, supplying food items is strictly regulated in India under the Food Safety and Standard Act, 2006 ("FSSAI Act"), The Applicant is acting as a facilitator in the transaction between the third-party contractor and employees. Therefore, the Applicant does not hold a license to carry out food related business. Had the Applicant engaged in the business of canteen services, the Applicant would have been required to obtain registration and undertake necessary compliance under the FSSAI regulations. The relevant provisions under FSSAI Act are extracted below: "Section 3 (l) (n) 'Food business" means any undertaking, whether for profit or not and whether public or private, carrying out any of the activities related to any stage of manufacture, processing, packaging, storage, transportation, distribution of food, import and includes food services, catering services, sale of food or food ingredients; Section 3 (l) (n) "food business operator" in relation to food business means a person by whom the business is carried on or owned and is responsible for ensuring the compliance of this Act, rules and regulations made thereunder; 1.1.12 From the abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cases that to attribute an intention to carry on business of selling goods it is not sufficient that the assessee was carrying on business in some commodity and he disposes of for a price articles discarded, surplus or unserviceable. It was urged, however, on behalf of the State that where a dealer with a view to reduce the cost of production disposed of unserviceable articles used in the manufacture of goods and credits the price received in his accounts, he must be deemed to have a profit motive, for it would be uneconomical for the business to store unserviceable articles and to survive as an economic unit. But the question is of intention to carry on business of selling any particular class of goods. Undoubtedly from the frequency, volume, continuity and regularity of transactions carried on with a profit motive, an inference that it was intended to carry on business in the commodity may arise. But it does not arise merely because the price received by sale of discarded goods enters the accounts of the trader and may on an overall view enhance his total profit, or indirectly reduce the cost of production of goods in the business of selling in which he is engaged. An attempt to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection with or incidental or ancillary to the principle business of seats of motor vehicles. 1.1.18 In this regard, the Applicant submits that the connected activities or incidental or ancillary activities cannot be construed to include all activities carried out by the business. Furthermore, as per Black' s Law Dictionary (Ninth Edition), "incidental" means dependent upon, subordinate to, arising out of or otherwise connected with (something else, usually of greater importance). Also, the term "ancillary" is defined in the Black's Law Dictionary (Ninth Edition) as supplementary; subordinate. 1.1.19 The activities which are having direct nexus with the main business can be said to be ancillary or incidental. One of such examples of could be sale of by-products, However, canteen facility is not related to or connected with the principle business of supply of seats of motor vehicles in that manner. Hence, the same cannot be construed as incidental or ancillary to the main business of the Applicant. 1.1.20 W support of the above contention, the Applicant relies on the case of Deputy Commissioner of Commercial Taxes vs. Thirumagal Mills Ltd. [1967 (20) STC 287 Madl] In the given cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was related to whether the selling of used cars is ancillary or incidental to the pharmaceutical business of the assessee. The Hon'ble Delhi High Court held that: "11. In the present case, the main business of the petitioner is manufacture and sale of pharmaceutical products and the vehicles are used by it in the course of business (as written by Respondent No.- 2 in the impugned order (Annexure A-1)). This may lead to the inference that proceeds from the sales of such vehicles should have been included in the turnover and must be taxed accordingly. But the selling of used cars cannot by any stretch of the imagination be characterized as "ancillary or incidental to the business of a pharmaceutical company. It is not shown that the cars were of a special character e.g. air-conditioned vehicles especially designed to store and ferry pharmacy products. They were purchased for use of company employees and executives, for office purposes. At the stage of purchase, they suffered sales tax, which the assessee, as buyer, was bound to pay. However, the assessee never held them for the purpose of sale and purchase, but for using them. After their use, having regard to lapse of time, and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bus transportation facility provided by the Applicant is specifically excluded from the coverage of 'supply' under GST as per Clause (a) of Section 7 (2) of the CGST Act which reads as below: "Section 7 (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" "SCHEDULE III [See section 7] ACTIVITIES OR TRANSACTIONS WHICH SHALL BE TREATED NEITHER AS A SUPPLY OF GOODS NOR A SUPPLY OF SERVICES 1. Services by an employee to the employer in the course of or in relation to his employment. ... Emphasis Supplied 1.2.2 Section 7 (2) begins with a non-obstante clause and overrides Section 7 (1) of the CGST Act. A plain reading of above section provides that even in case where any activity may be treated as 'supply' in terms of Section 7 (1), certain activities/ transactions would still be excluded from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 center [section 17 (5) (b) (it)]. 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 was paid when procured by the employer. The same would hold true for free housing to the employees, when the same is provided in terms of the contract between the employer and employee and is part and parcel of the cost-to-company (C2C)". .. Emphasis Supplied 1.2.9 Basis the above press release, it is clear that any services provided by the employer to the employees in terms of the contractual agreement entered into between the employer and employee will not be subjected to the GST. As mentioned above, the Applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/-and premium amount is fixed as per the number of parents involved therein. The applicant will year 50% amount for maximum 2 members only and rest of money will be paid by respective employee. It is cashless Mediclaim insurance policy for the lock-in period of 3 years. The Mediclaim Insurance policy is made from "The Oriental Insurance Company Ltd". Further we find from the sample copy of insurance policy submitted before us by the applicant that the applicant Initially pays the entire premium along with taxes and then recovers 50% of the premium through salary in one instalment in case of staff and in three instalments in case of operators as the case may be. The Applicant is not in the business of providing insurance coverage. Secondly, to provide parental insurance cover, is not a mandatory requirement under any law for the time being in force and therefore, non-providing parental insurance coverage would not affect its business by any means. Therefore, activity of recovery of50% of the cost of insurance premium cannot be treated as an activity done in the course of business or for the furtherance of business. (4) We have referred to the term "Supply" described under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s amounts received for services rendered, since this entire amount is paid to the insurance company which is providing Mediclaim facilities to the employees and their parents. Such recovery of premium amounts by the applicant from their employees cannot be supply of services under the GST laws. In fact, what is happening in this case is that since the applicant is recovering 50% of the premium paid on Mediclaim from their employees, they want to treat the same as rendering of insurance output service to their employees and therefore they are contending that they are entitled to 100% input tax credit on the insurance premium paid to the insurance company in terms of Section 17 (5) (b) (iii) of the CGST Act, 2017, mentioned above. They have already submitted that they are primarily engaged in distribution of steel coils and also perform low value-added processing function in respect of some of the traded goods based on customer's requirements. The applicant has brought nothing on records to show that they are an Insurance Company and registered with such authorities. Hence it appears that the applicant is creating this fiction of providing health insurance to their employees only to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion as stated by the applicant in their submissions, is not a supply under GST Act. 5.3.3 To answer the second question we now refer to Schedule to the CGST Act which lists activities which shall be treated neither as a supply of goods nor a supply of services as per clause I of the said Schedule-III, Services by an employee to the employer in the course of or in relation to his employment shall he treated neither as a supply of goods nor a supply of services. 5.3.4 Since the applicant is not supplying any services to its employees, in view of Schedule III mentioned above, we are of the opinion that GST is not applicable on the nominal amounts recovered by Applicants from their employees in the subject case. ... Emphasis supplied 1.3.5 Further reliance is also placed on the recent decision of the Gujarat AAR in In Re: M/S Tata Motors Ltd. [2021 (8) TMI 735 - Authority for Advance Ruling, Gujarat] wherein it has been held that: "GST at the hands on the applicant, is not leviable on the amount re resent in the employees' portion of canteen charges. which is collected by the applicant and paid to the Canteen service provider. ....Emphasis Supplied 1.3.6 The understanding of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the time being in force. The relevant extract of the said provision is reproduced below: (b) the following supply of goods or services or both- (i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) except when used for the purposes specified 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: 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. ....Emphasis Supplied 1.4.5 In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bus transportation facility for transportation of its employees from place of work to home and back. Therefore, the Applicant recovers subsidized amount for the said transportation facility from its employees. 1.1.2 As discussed above, the Applicant is a company involved in the business of developing, manufacturing and marketing of seats of motor vehicles globally. Accordingly, the employees of the Applicant are engaged in developing, manufacturing and marketing of these automobile seats. It is already submitted that the Applicant is engaged in the business of seats of motor vehicles in Ground 3.1 above. The submissions of the Applicant made above equally apply in the case of Bus Transportation facility provided to the employees. Therefore, it is submitted that the Applicant is not engaged in the business of bus transportation and accordingly, the said facility provided by the Applicant to its employees does not amount to supply under the GST regulations. 1.2 Without prejudice to the above, the bus transportation facility provided by Applicant is excluded from the scope of supply in terms of Clause (a) of Section 7 (2) of the CGST Act. 1.2.1 The Applicant submits that the submis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .06.2017 in respect of nominal amounts of recoveries made from their employees to wards bus transportation service, is not correct. The exemption under the said notification is available only when the supply is taxable in the first place. In the subject case, the transaction between the applicant & their employees, due to "Employer-Employee" relation as stated by the applicant in their submissions, is not a supply under GST Act. 5.3.3 To answer the second question we now refer to Schedule III to the CGST Act which lists activities which shall be treated neither as a supply of goods nor a supply of services as per clause I of the said Schedule-III, Services by an employee to the employer in the course of or in relation to his employment shall he treated neither as a supply of goods nor a supply of services. 5.3.4 Since the applicant is not supplying any services to its employees, in view of Schedule III mentioned above, we are of the opinion that GST is not applicable on the nominal amounts recovered by Applicants from their employees in the subject case. ... Emphasis supplied 1.3.3 In view of the above, it is submitted that there should not be any GST implications on the rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereinafter referred to as 'Exemption Notification'). 1.5 The Applicant further submits that as per SI. No. 15 (b) of the Exemption Notification, "Non-airconditioned contract carriage other than radio taxi, for transportation of passengers, excluding tourism, conducted tour, charter or hire" is exempt from GST. The relevant part is reproduced below: SI.No. Chapter, Section, Heading, Group or Service Code (Tarif) Description of Services Rate (Percent) Condition 15 Heading 9964 Transport of passengers, with or without accompanied belongings, by (a) air, embarking from or terminating in an airport located in the state of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, or Tripura or at Bagdogra located in West Bengal; (b) non-airconditioned contract carriage other than radio taxi, for transportation of passengers, excluding tourism, conducted tour, charter or hire; or (c) stage carriage other than airconditioned stage carriage. Nil Nil 1.6 From the above table, it is clear that, passenger transportation services via non airconditioned contract carriage, other than radio taxi is used for transportation of passenger is exempted from GST. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of persons having approved seating capacity of not more than thirteen persons (including the driver), except when they are used for making the following taxable supplies, namely: (A) further supply of such motor vehicles; or (B) transportation of passengers; or (C) imparting training on driving such motor vehicles; (b) the following supply of goods or services or both- (i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) except when used for the purposes specified therein, life insurance and health insurance: ... Emphasis Supplied 1.4 bus transportation provided by the Applicant to its employees is clearly intended to be used in furtherance of business, therefore, ITC in respect of GST paid on the cost borne by the Applicant in lieu of transportation facility will be available. Further, the same would not be barred under Section read with Section 17 (5) (a) of CGST Act, as the renting or hiring of motor vehicles used for providing the transportation facility are having the approved capacity of more than thirt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) (i)]. 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 was paid when procured by the employer. The same would hold true for free housing to the employees, when the same is provided in terms of the contract between the employer and employee and is part and parcel of the cost-to-company (C2C)". ....Emphasis Supplied 1.3 Based on the above understanding, it is submitted that, in case, a certain pre-decided amount of recoveries are made by the employer for providing certain facilities to its employees and rest of the non-recovered amount is treated as cost to the company, the GST will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their employees, they have introduced a separate canteen policy as well as bus transportation facility to their employees. Based on the agreed terms between the taxpayer and their employees, they are making recoveries at subsidized rates for the canteen and bus transportation facilities provided to their employees. i. In this matter, kind attention is drawn to Section 7 (1A) of CGST Act 2017 wherein it is stated "where certain activities or transactions, constitute a supply in accordance with the provisions of sub-section (1), they will be treated either as supply of goods or supply services as referred to in Schedule-II." Kind attention in this matter is drawn on Sr. no. 5(e) of Schedule-II wherein it is stated "agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act" will be treated either as supply of goods or supply of services. ii. From the above foregoing facts as stated by taxpayer in their application as well as legality discussed hereinabove, it is proving that they have contractual agreement with their employees. It means their relation with their employees through agreement, are amounting to tolerate an act, which has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ointment of employees. As such, the Applicant would not get exemption under the SI. No. 15 of Notification No. 12/2017-Central Tax (Rate), as the amount is recovered under the category of amounting to tolerate an act, not related to providing canteen and bus services, as these two things are being provided by management of canteen and transporter on behest of taxpayer, not by their employees. Q 2.4. Without prejudice to the above, whether input tax credit is eligible on bus transport service and canteen service procured from third party supplier to the extent the cost is borne by the Applicant? DEPARTMENT SUBMISSION: ITC would be available when the inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the goods or services or both, subject to Motor Vehicle for transportation of person having approved seating capacity of not more than 13 persons (including driver of vehicle), as condition envisaged under SECTION 17 (5) (a) of the CGST ACT 2017. Q 2.5. Without prejudice, even if GST is payable in respect of aforesaid employee recoveries, what would be the value on which GST is payable? DEPARTMEN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e well-being and health of the employees and in accordance with the provision of Factories Act, 1948, the Applicant has introduced a Lear India Canteen and Transportation Deduction Guidelines wherein the Applicant will be providing quality food and refreshments to employees at subsidized rates in the company premises. The recovery of amounts is evident from the salary slips of the employees wherein the express deductions that are recovered by the Applicant on account of food and bus transportation are mentioned. (4) In order to provide the said canteen and bus transportation facility, the Applicant has engaged third party service providers who are providing the said canteen and bus transportation facilities to the Applicant. Since, the said services are provided by the third party service providers to the Applicant, the service providers are raising their invoices with applicable GST to the Applicant. The Applicant pays the consideration to the third-party service providers for the said canteen and transportation facilities. Thereafter, the Applicant recovers certain portion (i.e., subsidized amount is deducted from salary of the employees on monthly basis) of the cost of the can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vity or transactions in connection with or incidental or ancillary to activities mentioned in (a) would also be included in 'business'. Clause '(c)' provides that there would not be requirement of volume, frequency, or regularity of such transactions. (2) It is an accepted fact that the Applicant is not carrying out supply of canteen services as his principal activity. No doubt his principal activity remains as manufacture and supply of seats for motor vehicles which is covered by clause 'a' of above definition. Let's see whether the activity of supply of canteen and transportation services, falls under the definition of business, as extracted above. Clause (b) mentions that any activity or transaction incidental or ancillary to principal activity would also be included in 'business'. The term 'incidental' has been defined in various dictionaries as under: Oxford Dictionary - the happening as part of something more important. Cambridge Dictionary - less important than the thing something is connected with or part of Dictionary.com - happening or likely to happen in an unplanned or subordinate conjunction with something else. Similarly word 'ancillary' has been defined as un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it is evident on record that there are two distinct and totally different transactions in the event of supply of these services to the employees of the Applicant. They are: - i) Supply of these services by the respective service provider to the Applicant (employer); and ii) Supply of these services by the Applicant (employer) to their employees. (4) In respect of the first transaction, the respective service providers have been supplying these services to the Applicant (employer) for which the said service provider receives consideration from the Applicant on which the Applicant has been paying GST to these service providers. (5) Similarly, in the second transaction, the Applicant (employer) is supplying these services to their employees for which the Applicant is receiving consideration, although at the subsidized rate, from their employees. The respective service provider invoices the appellant for the entire services. He charges the consideration along with GST thereon. There is no privity of contract between these service providers and the employees. It is the Appellant (employer) which is providing these services to the employees. Applicant deducts certain amount fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the above, it could be inferred that perquisites in terms of a contractual agreement between the employer and employee are not to be subjected to GST. (2) It may be seen that in order to place any service provided by the employer to employee outside the ambit of GST, the same should be in the form of a perquisite. Though the term 'perquisite' has not been defined under the provisions of GST, the same is discussed under the Income Tax Act, where it has been stated in Section 17 (2) as follows: - "perquisite" includes- (i) the value of rent-free accommodation provided to the assessee by his employer; (ii) the value of any concession in the matter of rent respecting any accommodation provided to the assessee by his employer; (iii)---------------- ........... ..........." (3) As per Income Tax Act, 1961, perquisite is defined to be the value of free benefit or facility given by the employer to his employees. The collection from the employees of whatever value, is not covered under 'perquisite'. It could be inferred from the above, that any service rendered free of charge, or, any service rendered on a concessional basis shall qualify as a perquisite. But, it is to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of cars which were purchased under first point regime and were sold during the last point regime from levy of tax. Thus, the fact and provisions of law in that case are different than the current case. Applicant has further quoted judgement in case of M/s Raipur Mfg Co. Vs State of Gujarat (CA No.603 of 1966). However, the facts in ANCE this case and the provisions of law involved are completely different. (2) In this regard, we notice that the applicant has further placed reliance on the ruling of Gujarat AAR in RE: Emcure Pharmaceuticals Limited [2022-VIL-231-AAR] the ruling of Maharashtra AAR in RE: Tata Motors Limited in [2021-TIOL-197-AAR-GST-2020-VIL-257-AAR], the Maharashtra AAR in a ruling in RE: Posco India Pune Processing Centre Pvt Ltd (Order dated 07.09.2018), Authority for Advance Ruling, Maharashtra in M/s Jotun India Pvt Ltd (Order dated 4.10.2019), We would like to place on record that an advance ruling pronounced by the Authority or the Appellate Authority shall be binding only on the applicant who had sought it, and the concerned officer or the jurisdictional officer in respect of the applicant. Further, this authority has placed reliance on Rulings i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder: 15 Heading 9964 Transport of passengers, with or without accompanied belongings, by- (a) air, embarking from or terminating in an airport located in the State of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, or Tripura or at Bagdogra located in West Bengal; (b) non-airconditioned contract carriage other than radio taxi, for transportation of passengers, excluding tourism, conducted tour, charter or hire; or (c) stage carriage other than air-conditioned stage carriage. Nil Nil 5.2.4 We observe that, as per clause (b) of above SI. No. 15 of Notification No. 12/2017-Central Tax (Rate), dated 28.6.2017, the services of transportation of passengers, with or without accompanied belongings, by non-air-conditioned contract carriage other than radio taxi, for transportation of passengers, excluding tourism, conducted tour, charter or hire is exempt from GST. In Pard 2(t) of Notification No. 12/2017-Central Tax (Rate), dated 28.6.2017, the term Contract Carriage has been defined as under: (t) "contract carriage" has the same meaning as assigned to it in clause (7) of Section 2 of the Motor Vehicles Act, 1988 (59 of 1988); In clause (7) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xclusion of, passengers; (v) that, in the case of motor cabs, specified fares or rates of fares shall be charged and a copy of the fare table shall be exhibited on the vehicle; (vi) that, in the case of vehicles other than motor cabs, specified rates of hiring not exceeding specified maximum shall be charged; (vii) that, in the case of motor cabs, a special weight of passengers' luggage shall be carried free of charge, and that the charge, if any, for any luggage in excess thereof shall be at a specified rate; (viii) that, in the case of motor cabs, a taximeter shall be fitted and maintained in proper working order, if prescribed; (ix) that the Regional Transport Authority may, after giving notice of not less than one month,- (a) vary the conditions of the permit; (b) attach to the permit further conditions; (x) that the conditions of permit shall not be departed from save with the approval of the Regional Transport Authority; (xi) that specified standards of comfort and cleanliness shall be maintained in the vehicles; (xii) that, except in the circumstances of exceptional nature, the plying of the vehicle or carrying of the passengers shall not be refused; (x ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Applicant is providing contract carriage service to its employees. Further, the hire or charter services are excluded from the said entry 15(b) of Notification No. 12/2017 CT(R) dated 28.06.2017. In view of aforesaid discussion, the transportation services provided by the Applicant to its employees are not covered by entry 15(b) of the Notification No. 12/2017 CT(R) dated 28.06.2027. The services provided by M/s. Lear Automotive India Pvt. Ltd. squarely fall under transport of passengers under SAC 9964 and taxable at 5% without ITC or 12% with ITC (If ITC is not blocked by other provisions) under entry No. 8 (vi) of Not. No. 11/2017 CT(R) dated 28.06.2017 as amended from time to time. 5.3 Whether ITC of tax paid to Canteen Service Provider for Canteen Services is available 5.3.1 Now, coming to the other issue which is to be decided here is, whether input tax credit (ITC) is available to the Applicant on GST charged by the service provider on the canteen facility provided to employees working in the factory. 5.3.2 Before deliberating on this issue, it would be prudent to refer to the Section 17 (5) (b) of CGST Act, 2017, which pertains to blocking of ITC: Section 17 (5): Not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, is applicable to whole clause (b) of Section 17 (5). The relevant portion of above clarification is reproduced below: Clarification on various issues of section 17 (5) of the CGST Act 3 Whether the proviso at the end of clause (b) of sub-section (5) of section 17 of the CGST Act 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 Services Tax (Amendment Act), 2018, clause (b) of sub-section (5) of section 17 of the CGST Act was substituted with effect from 1-2-2019. 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 laws 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 28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 30.09.2019 has been issued exercising power under Section 16(1) and Section 148 of the CGST Act, 2017, so as to come out of the provisions permitting availment of ITC. In other words, a Taxpayer providing Restaurant Service has no option of taking ITC and providing Restaurant Service at normal rate. 5.3.7 Accordingly, the canteen service provider is providing the restaurant service to the workers of the Applicant on behalf the said Applicant and paying Tax at specified rate of 5% in terms of the Notification ibid, The Applicant is also recipient of service when viewed in terms of definition of recipient of service, as defined in Section 2 (93) (a) of the CGST Act, 2017, which is reproduced below: - "(93) "recipient" of supply of goods or services or both, means - (a) where a consideration is payable for the supply of goods or services or both, the person who is liable to pay that consideration;" 5.3.8 So in the instant case, the flow of the transaction is that the Canteen Contractor is providing service to the Applicant, which is classifiable as Restaurant Service and the Applicant himself is also providing same service to its workers as mandated in the Factories Act, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eligible on facility of transportation provided by the appellant to its employees as same was merely in the nature of service for personal use or consumption of its employees. The substantial question of law involved in the said judgement is: 1. Whether the services provided by a Manufacturer of transportation of its employees, from their designated pick up points to their workplace, by Bus, would amount to a service for personal use or consumption of any of the employees?" 2. Whether the activity of providing bus transport services to its employees, at the cost of the Manufacturer, to reach factory in time and the expenses incurred by the Manufacturer in providing such service, (which amount is taken into consideration, while determining the final price of the product) can be said to be a component Y leading to the manufacturing activity, so as to entitle the Manufacturer, the benefit of Cenvat Credit? The view held by Hon'ble High court is produced below: "The transportation of employees from distance of about 40 kms for reaching factory is not an activity which could be said to be a part of manufacturing activity. It is merely for personal convenience of the employees to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicant ineligible to avail input tax credit on the invoices issued to him by the transporter for transportation of employees as per Section 17 (5) (g) of CGST/MGST Act 2017. 5.5 Value in respect of which canteen and transportation services are taxable As explained in above paras, supply of canteen services and transportation services to the employees would in normal course constitute to be the supply of services u/s 7 (1) of GST Act 2017. However, it is now clarified by the CBIC circular No. 172/04/2022/GST dated 6th July 2022 that perquisite provided to the employees in view of the Contractual Agreement would not be subjected to GST. It is clarified that such perquisite are in lieu of the services provided by the employees to the employer in the course of or in relation to his employment, and should not be subjected to GST. Supplies of any services would not be subjected to GST only under the following circumstances. 1. Such services are exempt under the notification number 12/ 2017, CT(R) dated 28/06/2017. 2. Such a transaction in services is a non-GST supply. 3. Such services are not supply as per provisions in section 7 of CGST Act, 2017 The supply of canteen and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the employer to the employee would not have respite from above two aspects mentioned at Sr.No.1 and 2 above as the said supply is neither exempted nor a Non-GST supply, it would be appropriate to interpret that the perquisite given to the employees in view of the contractual Li agreement are in lieu of services given by the employee to the employer and would not be subjected to GST by deeming it to be part of Schedule III as a corollary to entry at Sr. No. 1 of Schedule III for cohesive interpretation. The value of the outward supply of canteen and transportation service can be considered as having two parts. First part is the amount of recovery that is made from the employees, and second part is balance value of the services provided by the employer as perquisite which is in the lieu of the services provided by employees to the employer. The entire balance value of the services for which no amount is charged is the perquisite provided by the employer to the employees. As this part is in lieu of services of the employees to the employer which fall under schedule 3, the perquisite part is not taxable, as a corollary, deeming it to be falling in the said entry of schedule 3. Hence, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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