2024 (1) TMI 170 - AAR - GST

AAR rejects advance ruling on GST for subsidized employee canteen services citing applicant as service receiver not supplier

AAR Rajasthan rejected an advance ruling application regarding GST on subsidized canteen services provided to employees through third-party contractors. ... Scope of Advance Ruling application - Supply or not - providing food to employees at subsidized price - covered by Entry 1, Schedule III of the Central Goods and Services Tax Act, 2017 and Rajasthan Goods and Services Tax Act, 2017 or not - subsidized deduction made from the salary of employees, who are availing facility of food in the factory - Section 7 read with Schedule I of the Central Goods and Services Tax Act, 2017 and Rajasthan Goods and Services Tax Act, 2017 - GST on the amount deducted from the salaries of employees - Input tax credit on the GST charged by third party contractor for canteen services availed by it for its employees. HELD THAT:- The applicant is Involved providing Canteen Services to its workers/ employees through contractual agreement with third party contractor and recover subsidized deduction from workers. The applicant submitted that to provide canteen facility, Applicant has engaged a third-party canteen service provider (“canteen contractor), for providing quality food and refreshments to its employees. Canteen contractor charges as per the agreed price per meal from Applicant. It is raising invoice under SAC 996333 and is charging GST @ 5% from Applicant. This authority is constituted to decide on matters or questions specified in sub-section (2) of Section 97, in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant. Thus, the applicant is not a supplier in the present case, the applicant as per the contract is a receiver of services supplied by the canteen service provider also. The scope of the ruling for Authority for Advance Ruling (AAR) is limited to the transactions being undertaken or proposed to be undertaken. In the instant case, as already narrated, the application seeking advance ruling was filed on 21.03.2023 before the RAAR with respect to supplies already being undertaken and GST has been already paid. Hence, the case is out of the purview of the Advance Ruling. As per Section 95 of CGST Act, 2017; this authority shall decide on matters or on questions specified in sub-section (2) of Section 97, and “Authority” means the Authority for Advance Ruling, constituted under Section 96. Hence, the case does not fall under the purview of the Advance Ruling. The subject application for advance ruling made by the applicant is not maintainable and hereby rejected under the provisions of the GST Act, 2017. Issues Involved:1. Whether providing food to employees at subsidized price falls outside the scope of 'supply'.2. Whether the subsidized deduction from employees' salaries can be considered as consideration for 'supply of service'.3. Whether GST is applicable on the amount deducted from employees' salaries.4. Whether the applicant is eligible to take input tax credit (ITC) on GST charged by the third-party contractor for canteen services.Summary:Issue 1: Scope of 'Supply'- Applicant's Argument: The applicant contends that providing food at subsidized prices to employees does not constitute a 'supply' under GST, as it falls under Entry 1, Schedule III of the CGST Act, which excludes services by an employee to the employer in the course of employment.- Authority's Findings: The authority finds that the applicant is providing canteen services through a third-party contractor and is recovering subsidized costs from employees. This activity does not fall outside the scope of 'supply' as per Section 7 of the CGST Act.Issue 2: Consideration for 'Supply of Service'- Applicant's Argument: The applicant argues that the subsidized deductions from employees' salaries are not in the nature of consideration for any supply.- Authority's Findings: The authority concludes that the subsidized deductions made from employees' salaries for canteen services are considered as consideration for the supply of services by the applicant to its employees, in furtherance of business.Issue 3: Applicability of GST- Applicant's Argument: The applicant believes that no GST is payable on the deductions made from employees' salaries for canteen services.- Authority's Findings: The authority rules that GST is applicable on both the amount recovered from employees and the amount paid by the applicant to the canteen service provider.Issue 4: Eligibility for Input Tax Credit (ITC)- Applicant's Argument: The applicant asserts that it is eligible to take ITC on the GST charged by the third-party contractor for canteen services, as it falls under the proviso to Section 17(5)(b) of the CGST Act.- Authority's Findings: The authority determines that ITC is not admissible on the GST paid on canteen services as it is barred under Section 17(5)(b)(i) of the CGST Act.Conclusion:The Authority for Advance Ruling (AAR) in Rajasthan ruled that the application for advance ruling is not maintainable as the transactions in question were already being undertaken and GST was already being paid. Therefore, the case does not fall under the purview of Advance Ruling as defined under Section 95 of the CGST Act, 2017. The application is rejected under the provisions of the GST Act, 2017.