2024 (6) TMI 225 - AAAR - GST

AAAR sets aside AAR ruling on GST applicability for employee food facility deductions, remands for fresh consideration

In Re: M/s Federal-Mogul Goetze India Limited

AAAR Rajasthan set aside AAR's ruling dated 18.10.2022 regarding GST applicability on food facility deductions from employees and contractual workers. The ... Maintainability of Advance Ruling application - Supply of not - subsidized deduction made by the Appellant from the Employees who are availing food facility in the factory under the provisions of Section 7 of Central Goods and Service Tax Act, 2017 and Rajasthan Goods and Service Tax Act, 2017 - applicability of GST on the nominal amount deducted from the salaries of their employees - Applicability of GST on nominal amount deducted from the Manpower supply contractor in case of contractual employees - Input Tax Credit (ITC) of the GST charged by the Canteen Service Provider. Maintainability of Advance Ruling application - whether or not the application dated 11.03.2022 filed by the Appellant for seeking advance ruling on various questions is maintainable? - HELD THAT:- AAR Rajasthan have not taken note of the contract furnished by the appellant for the period from 01.04.2021 to 31.03.2022. which was valid during the period when Ruling was pronounced. It will be in the fitness of things if the Authority for Advance Ruling re-consider whole application dated 11.03.2022 filed by the appellant before the Authority for Advance Ruling, Rajasthan on merits. The Ruling of AAR, Rajasthan dated 18.10.2022 is set aside and the matter is remanded back, to the AAR to decide the application afresh on merits after considering all the questions posed by the appellant in their application dated 11.03.2022. Issues Involved:1. Whether the subsidized deduction from employees for canteen services constitutes a 'supply' u/s 7 of CGST Act, 2017.2. Applicability of GST on the nominal amount deducted from employees' salaries and from the manpower supply contractor for contractual employees.3. Eligibility of Input Tax Credit (ITC) for GST charged by the Canteen Service Provider.Summary:Issue 1: Subsidized Deduction as 'Supply'The Appellant sought an Advance Ruling on whether the subsidized deduction from employees for canteen services constitutes a 'supply' u/s 7 of CGST Act, 2017. The AAR, Rajasthan initially ruled that the application was not maintainable as the transactions were ongoing since July 2017 and GST was already being paid. The AAAR, however, noted that the contract with the canteen service provider was valid during the period when the ruling was sought, and the supplies were still ongoing. Thus, the AAAR held that the AAR erred in not pronouncing the ruling on merits and remanded the matter back to the AAR for reconsideration.Issue 2: GST Applicability on Nominal Amount DeductedThe Appellant argued that the nominal amount deducted from employees' salaries for canteen services should not be considered as 'supply' u/s 7 of CGST Act, as it is a statutory obligation under the Factories Act, 1948, and does not qualify as a commercial transaction. The AAAR noted that this issue needs to be reconsidered by the AAR on merits, taking into account the ongoing nature of the transactions and relevant legal provisions.Issue 3: Eligibility of ITCThe Appellant contended that they should be eligible for ITC on the GST paid to the Canteen Service Provider as it is a statutory requirement u/s 46 of the Factories Act, 1948. The AAAR observed that this issue also needs to be reconsidered by the AAR on merits, particularly in light of the proviso to Section 17(5)(b) of CGST Act, which allows ITC where it is obligatory for an employer to provide such services under any law.Conclusion:The AAAR set aside the ruling of the AAR, Rajasthan dated 18.10.2022 and remanded the matter back to the AAR to decide the application afresh on merits, considering all the questions posed by the appellant in their application dated 11.03.2022.