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TMI Blog2025 (4) TMI 1050X X X X Extracts X X X X X X X X Extracts X X X X ..... out prejudice, even if GST is payable in respect of aforesaid employee recoveries, what would be the value on which GST is payable? 5) This advance ruling is also sought to ascertain whether the notice pay recoveries made by the Applicant from its employees for not serving the notice period is taxable under the GST laws? 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 to the earlier, 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 FACTS: 1.1 Ferrero India Pvt. Ltd. (hereinafter referred to as 'Applicant') is a part of the Ferrero Group engaged in the manufacture and sale of chocolate and confectionary products. The Applicant has established its corporate headquarters in World Trade Center, 8th Floor, Tower 3, Kharadi, Pune - 411014 and operates its manufacturing facility from Plot no. F13, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd transportation facility to its employees at the Baramati unit based on the employment terms of the Applicant. 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. The relevant clauses of the Long-Term Wage Settlement Agreement are extracted below: 15. It is agreed by both the parties that canteen facility will be provided to all eligible workmen agents the deduction of Rs. 10/- per day from each workman. Breakfast, lunch/dinner provided in the canteen will be vegetarian. The Manu will be decided by the existing canteen committee members. All workmen will lift their plates and water glasses after breakfast, lunch/dinner and put the left outs in the garbage bins and will put the plate and glass at the used plate window. 16. Transport Facility: It is agreed by both the parties that, the transport facility on present routes will be continued by the company and there are no additions in the bus routes. Company will have full rights and absolute authority to decided amendments, alter the present bus routes as deemed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loyees who work in the shifts as well as to maintain the continuity in manufacturing and research & development work. 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. Notice Pay Recovery. 1.13 Further, there are various instances where the employees decide to resign and leave the employment without serving the complete notice period. Due to sudden change in the transitioning the job role to new employee (i.e., in cases where notice period is not served), the Applicant suffers consequential losses since every employee is designated with some or the other crucial responsibility. 1.14 In this regard, it is imperative to note that in case the employee does not serve the mandated notice period, in part or in full, the Applicant is entitled to monetary compensation, hereinafter referred to as "Notice Pay Recovery" from the employee's salary payment. In case where the respective employee does not serve the full notice period based upon the company policy as per his / her Grade, the Applicant d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her. 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 Section 7 (1) (a) of CGST Act defines the term 'supply' widely to include all forms of supply of goods or services or both such as sale, transfer, disposal, etc. made or agreed to be made for a considerat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve 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 chocolate and confectionary products. The entire business activities are aimed towards the manufacture, develop, sales, distribution, promotion of chocolate and confectionary products. 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 be engaged in manufacture of chocolate and confectionary products. Hence, it is submitted that the Applicant is engaged in business of chocolate and confectionary products. 1.1.7 As stated above, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given case in hand, the provision of canteen facility is merely a facilitator function extended by the Applicant to the employees. Hence, the said activity cannot be equated with business. 1.1.12 In this regard, reliance can be placed in the case of State of Gujarat vs. Raipur Manufacturing Co. Ltd. (Civil Appeal No. 603 of 1966) wherein the Petitioner was engaged in the business of manufacturing and selling cotton textiles. The Petitioner purchased coal for usage in business of cotton textiles. The said coal was later sold by the Petitioner. The Supreme Court held that the Petitioner was not engaged in the business of coal. The operative part of the judgement is extracted below: "8. It is clear from these 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to existence later which establish such an intention. It may be pointed out that the burden of proving that the Company was carrying on business of selling coal lay upon the Sales-tax authorities and if they made no investigation and have come to the conclusion merely because of the frequency and the volume of the sales, the inference cannot be sustained." .. Emphasis Supplied 1.1.13 It is also submitted that as per clause (b) of Section 2 (17), business also includes any activity which is in connection with or incidental or ancillary to the activities covered under clause (a) of Section 2 (17) of the CGST Act. Hence, one may question as to whether the provision of canteen facility can be said to be in connection with or incidental or ancillary to the principle business of chocolate and confectionary products. 1.1.14 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 grea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that commodities may be made available to them at fair price. It may be that in fact profit accrues. But that is not what is material. The question is whether the assessee meant to run the fair price shop as a trade or commerce or a commercial activity. We do not find it possible to say that the fair price shop is a commercial activity of the assessee. We hold that the assessee is not carrying on the business of selling commodities in the fair price shop in a trade or commercial sense, and that, therefore, it is not with reference to the fair price shop a dealer within the meaning of the Act." ... Emphasis Supplied 1.1.17 In the case of Panacea Biotech Limited vs. Commissioner of Trade and Taxes [(2013) 59 VST 524 (Del.)] the issue 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that the transportation facility is not the business of the Applicant. 1.1.21 It is further submitted that transportation facility provided by the Applicant to its employees is not related to or connected with the principle business of supply of chocolate and confectionary products in that manner. Hence, the activity is not even incidental or ancillary to the main business of the Applicant. Hence the Applicant cannot be asked to pay GST on transport recoveries. 1.2 Without prejudice to the above, the canteen facility and 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 also submits that the canteen facility and 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctly in connection with the employment of the employees. 1.2.7 Also, as per the Press release issued by the Ministry of Finance dated 10 July 2017 which states the following: "Another issue is the taxation of perquisites. 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 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 Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t forth before us is very limited. We find from the documents of insurance scheme submitted on record that the applicant provides Mediclaim cover to their employees' parents. There are four types of category of scheme wherein sum insured amount for family floater is at Rs. 300000/-and premium amount is fixed as per the number of parents involved therein. The applicant will bear 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 installment in case of staff and in three installments 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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... produced as below: "We find that the applicant is paying the premium towards mediclaim taken for their employees and the parents of such employees. Against such payments made they are recovering 50% from their employees. There is no way that the 50% amount recovered can be treated as 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 50% 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 tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom 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 1 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 Reliance is also placed on the recent decision of the recent decision of this Hon'ble Authority in In Re: Emcure Pharmaceuticals Limited [2022-VIL-04-AAR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their employees is definitely not an activity which is incidental or ancillary to the activity of developing, manufacturing and marketing of pharmaceutical products, nor can it be called an activity done in the course of or in furtherance of developing, manufacturing and marketing of pharmaceutical products as it is not integrally connected to the business in such a way that without this, the business will not function. Hence, it is held that, GST would not be payable on the recoveries made from the employees towards providing bus transportation facility." 1.3.6 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 representing the employees portion of canteen charges, which is collected by the applicant and paid to the Canteen service provider." ... Emphasis Supplied 1.3.7 The understanding of the Applicant is supported by the aforesaid rulings that the Applicant is not involved in the business of providing canteen facility. The Applicant has no intention to carry out the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 submission made by the Applicant in respect of canteen recovery in Ground-3.2 equally applies so far as the bus transportation is concerned. Therefore, it is humbly submitted that the bus transportation facility is specifically excluded from the purview of 'supply' in terms of Section 7 (2) (a) read with Schedule-III to the CGST Act. 1.3 Without prejudice to the above, it is settled position under GST regime that employee recoveries do not amount to 'supply'. 1.3.1 The Applicant submits that the submission made by the Applicant in respect of canteen recovery in Ground-3.3 equally applies so far as the bus transportation is concerned. Therefore, it is humbly submitted that the recovery towards bus transportation facility does not amount to 'supply' in light with the advance rulings pronounced by this Hon'ble Authority. 1.3.2 Further reliance in this regard, is placed on the advance ruling in the case of M/s. Tata Motors Ltd. (supra) wherein the applicant had sought a ruling as to whether GST is applicable on nominal amount recovered from employees for usage of employ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mphasis supplied 13.3 In view of the above, it is submitted that there should not be any GST implications on the recoveries made from the employees for providing the bus transportation facility as a part of employment contract. C. Applicant's Interpretation with respect to the applicability of exemption from GST in respect of provision of Non-AC bus transportation facility to its employees. 1.1 The Applicant reiterates that the bus transportation facility provided by the Applicant to its employees are undertaken via Non-Air-conditioned (Non-AC) buses. 1.2 The Applicant submits that the transportation of employees by the Applicant through usage of Non-AC buses would merit classification under the Tariff 9964 as "Passenger Transportation Services". It is submitted that the Annexure for Scheme of classification of services appended to Notification 11/2017-Central Tax (Rate) provides the manner for classification of services. The relevant extract of the same is reproduced below: SI.No. Chapter, Section, Heading or Group Service Code (Tariff) Service Description 89 Heading 9964 Passenger Transportation Service Group 99641 Local transport and sightsee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onditioned contract carriage, other than radio taxi is used for transportation of passenger is exempted from GST. The Applicant submits that the buses engaged in the transportation of employees are Non-AC buses. It is further submitted that the buses involved in the given case on hand is not a radio-taxi. The Applicant also submits that the buses engaged by Applicant in the given case are registered as "contract carriage". The contract carriage permit of the said buses are attached with this application. 1.7 In view of the above discussion, the services of transportation of the employees of the Applicant through Non-AC buses would be treated as passenger transportation service classified under Tariff 9964. Further, as per SI. No. 15 (b) of the Exemption Notification, the Non-AC buses being a Non-AC contract carriage would be covered under the exemption from GST. 1.8 Thus, it is humbly submitted that even in case where the bus transportation facility amounts to service, the said supply of service by the Applicant to its employees would be exempted from GST. D. Without prejudice to the above, even if GST is payable by the Applicant on the canteen recoveries made, the Applicant is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the supplier for providing the facility the employee. E. Applicant's Interpretation with respect to the notice pay recoveries made from the employees for not serving the notice period, are provided in the below grounds which are without prejudice to each other. 1.1 Without prejudice to the above, the notice pay recovery by Applicant is excluded from the scope of supply in terms of Clause (a) of Section 7 (2) of the CGST Act. 1.1.1 The Applicant also submits that the notice pay recovery 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 ACTIVITIES OR TRANSACTIONS WHICH SHALL BE TREATED NEITHER AS A SUPPLY OF GOODS NOR A SUPPLY OF S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Services by an employee to the employer in the course of or in relation to his employment. Q.2 Whether the recoveries made by the Applicant from the employees for providing bus Transport facility to its employees is taxable under the provisions of CGST Act? Ans: Yes, it is taxable supply of service under GST law as it is a supply by the Applicant to its employees and such supply is not covered by S.No. 1 under schedule III of CGST Act, 2017 which only excludes the following from GST purview: "Services by an employee to the employer in the course of or in relation to his employment. Q:3 Without prejudice, even if GST is applicable in respect of employee recovery towards bus Transportation facility, whether the Applicant would be exempted under the SI. No. 15 of Notification No. 12/2017-Central Tax (Rate)? Ans: No, the Applicant would not be exempted under the SI. No. 15 of Notification No. 2017-Central Tax (Rate) Q.4 Without prejudice, even if GST is payable in respect of aforesaid employee recoveries what would be the value on which GST is payable? Ans: The value is the total consideration recovered by the Applicant i.e. total amount recovered by the Applicant fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Manpower Supply under RCM. 2. GTA under RCM 3. Legal Consultancy Services under RCM. 4. Rent a cab under RCM. 5. Works Contract Services under RCM 6. Taxable services-other than the 119 listed under RCM (5)(b) Rate/ Rates of Services Tax as applicable to services provided 14.5% (5)(c) Details of benefits of Notification of services tax if any availed. No (6) Copies of Advance Ruling Application/orders If any obtained by applicant under the provisions of Central Excise, Service Tax and Sales Tax and their present status in case of your company / related company or sister concern. No (7) Copy of show cause notices/ adjudication order in respect of Central Excise of S. Tax if any issued during Last Five years, in company or sister concern. No (8) Cases of violation of Central Excise/Services Tax if any booked during last five years No (9) Whether any proceeding is pending before any authority on said subject matter otherwise. No 04. HEARING Preliminary hearing in the matter was held on 05.04.2022. Mr. Arpit Chaturvedi & Mr. Vikas Gattani, Head of Tax ware appeared, and requested for admission of the application. Jurisdictional Officer Smt. Seema Gajbhiye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount is deducted from salary of the employees on monthly basis) of the cost of the canteen and bus transportation incurred by the Applicant from its employees. (5) Applicant has contended that the recovery of amounts from employees for canteen services or transportation services to employees do not fall under supply' as per section 7 as supply of these services are not in the course or furtherance of 'business'. Further, they have also taken a view 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. (6) Various grounds raised by the Applicant to contend that the recovery of amounts from the employees for providing canteen and transportation services are discussed as below. 5.1.2 Whether supply of canteen and transportation services provided to employees is in the course or furtherance of business. (1) We observe that the Applicant has argued that he is in the business of manufacture and supply of chocolate and confectionary products and supply of canteen or transportation services is not his business. The Applicant has taken view that supply of ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conjunction with something else. Similarly word 'ancillary' has been defined as under: Oxford Dictionary - provide necessary support to the main work or activities of an organisation. - In addition to something else but not as important. Cambridge Dictionary: providing support or help. Dictionary.com - supporting, secondary, subsidiary The reading of all above definitions clarify that any activity, which supports the main activity or necessary to carry out the principal activity, is an activity or transaction in connection with or incidental to or ancillary to the principal activity. The activity of providing food in canteen and transportation services to its workers who are pivotal to his principal activity can definitely be said to be in connection with or incidental or ancillary to his main activity of manufacture and supply of chocolates and confectionary. (3) Further, in terms of Section 2 (17) (c), as mentioned in para (1) above, the volume of transaction is immaterial for the purpose of coverage under "Business", therefore, even if supply of food is quite insignificant activity in terms of volume of transaction, still in terms of clause (c) of the aforesaid sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the Appellant (employer) which is providing these services to the employees. Applicant deducts certain amount from salary of the employees against this supply. Applicant makes only part of the recovery and balance cost is borne him. Hence, the criteria of 'business', 'consideration' are met in the transaction of supply of these services by Applicant to the employees. Thus, there is supply of canteen services and transportation services from the Applicant to the employees, u/s. 7 (1) of CGST Act, 2017. 5.1.4 Taxability of Supply of Canteen services and transportation services to the employees (1) Another contention of the Applicant is that the perquisites forming part of employment contract were excluded from GST. As per the Circular no. 172/04/2022-GST dated 06.07.2022 of CBIC, the relevant extract of the said circular is reproduced hereunder for ease of reference: S.No. Issue Clarification 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred 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 noted that only the value/ portion to the extent of concession offered by the employer is to be treated as a perquisite and not the remaining portion/value that has been charged by the employer. Applying the said analogy to the instant case, in respect of the canteen and transportation services provided by the applicant to its employees, it becomes clear that the exemption provided in Entry 1 of Schedule III to the CGST Act, 2017 applies only to the concession part extended to the employees and not on the value charged to the employees. Thus, the recoveries made from the employees for canteen and transportation services are liable to levy of tax. 5.1.5 The Applicant has presented following arguments in support of his stand (1) The Applicant relies on the case of Deputy Commissioner of Commercial Taxes vs. Thirumagal Mills Ltd. [1967 (20) STC 287 Mad]. M/s Thirumagal Mills Ltd. is a spinning mill manufacturing cotton yarn. The issue relates to taxation of a fair price shop run by the assessee for the benefit of its employe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ho had sought it, and the concerned officer or the jurisdictional officer in respect of the applicant. Further, this authority has placed reliance on Rulings in case of Himachal Pradesh AAAR dated 26.09.2023 in case of M/s Federal-Mogul Anand Bearings India Limited, Tamil Nadu AAAR dated 05.05.2023 in case of M/ s Kothari Sugars and Chemicals Limited and Tamil Nadu AAR dated 20.12.2023 in case of M/s Faiveley Transport Rail Technologies India Private Limited. (3) If incidental of ancillary supply of goods or services such as canteen or transportation services by the employer to employee were to not fall under 'business', it would not be necessary to provide respite to 'supplies by employer to employees given as perquisite' from falling under 'supply' by taking recourse to schedule III. That is, if a transaction or activity is not a supply u/s 7 (1) of CGST Act, then there would not be necessity to place such a transaction u/s 7 (2) (a) for deeming it to be neither supply of goods nor supply of services. Hence, as discussed in Para 5.1.2 and 5.1.3, Applicant's activity of supply of canteen and transportation services falls u/s 7 (1) of CGST Act, 2017. As discussed in Para 5.1.4, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business: Provided that gifts not exceeding fifty thousand rupees in value in a financial year by an employer to an employee shall not be treated as supply of goods or services or both. ". Further, Explanation to Section 15 reads as below. Explanation. - For the purposes of this Act, -- (a) persons shall be deemed to be -related persons if -- (i) such persons are officers or directors of one another's businesses; (ii) such persons are legally recognised partners in business; (iii) such persons are employer and employee; ...... As per 'a(iii)', employer and employee are deemed to be related persons for the purposes of this Act. This means any transaction between employer and employee will not come out of 'supply' for the reason of not having consideration. However, respite to such transactions has come through Schedule 3. Section 7 (2) (a) states that, notwithstanding anything in sub-section (1), activities or transactions specified in Schedule III shall be treated neither as a supply of goods nor a supply of services. Sonal Number 1 of Sched ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. Applicant has further used these buses for providing transport services to its employees. 5.3.2 The applicant submits that the services of employees to and from factory by non-air-conditioned buses will be covered under "transportation of passengers by non-air-conditioned contact carriages" which is exempted from payment of tax as per SI. No. 15 (b) of Notification No. 12/2017-Central Tax (Rate) dated 28.6.2017. 5.3.3 The SI. No. 15 of Notification No. 12/2017-Central Tax (Rate) dated 28.6.2017 reads as under: 15 Heading Transport of passengers, with or without accompanied 9964 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 5.3.4 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 transportati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordance with specified conditions, no contract of hiring, other than an extension or modification of a subsisting contract, may be entered into outside the specified area; (iii) the maximum number of passengers and the maximum weight of luggage that may be carried on the vehicles, either generally or on specified occasions or at specified times and seasons; (iv) the conditions subject to which goods may be carried in any contract carriage in addition to, or to the exclusion 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 le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract carriage as provided in clause (7) of section 2 of Motor Vehicles Act, 1988. We observe that 1. M/s. Ferrero India Pvt. Ltd. is not a holder of permit for contract carriage, 2. It is not charging passengers i.e. employees on a time basis. 3. It does not provide service to employees from one point to another. It is plying buses through various routes so as to pick up other employees. Thus, it is difficult to infer that the 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. Ferrero 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. 5.4 Whether the notice pay recoveries made by the Applicant from i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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