TaxTMI 
TaxTMI 
2019 (2) TMI 63
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.... 3) Whether recovery of Parents Health Insurance expenses from employee in respect of the insurance provided by the Applicant amounts to "supply of service" under Section 7 of the Central Goods and Service Tax Act, 2017? 4) If the said recovery amounts to "supply", what will be the time of supply and value of the said supply? Whether the Applicant can claim input tax credit of GST charged by the insurance company? 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 such 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, a reference to such a similar provision under the CGST Act / MGST Act would be mentioned as being under the "GST ACT' , 02. FACTS AND CONTENTION - AS PER THE APPLICANT The submissions, as reproduced verbatim, could be seen thus- Statement of relevant facts having a bearing on the question(s) raised QUESTION 1: Whether Input Tax Credit is admissibl....
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....led input tax credit of IGST. Subsequent to the import of goods, the Applicant sold the said goods to the customer under the cover of Tax Invoice on payment of applicable GST. (Copy of Bill of Entry is enclosed and marked as "Annexure - B") 2. Subsequent to the sale, it was observed that the said goods were defective and did not meet the customer requirements and therefore, the Applicant raised a Credit Note on the customer and subsequently, the customer also raised Debit Note. 3. As per the terms of the contract with POSCO Daewoo Corporation, Korea, the Applicant was required to charge back the loss incurred in the above said transaction. The Applicant had paid to POSCO Daewoo Corporation, Korea against their invoice and therefore, as per the POSCO group policy, the Applicant was required to recover the loss by raising Tax Invoice. It is worth to note that the Applicant has received payment in foreign currency against Tax Invoice raised towards recovery of loss. (Copy of Tax Invoice and marked as "Annexures C") 4. The Applicant would like to know Whether Tax Invoice raised by the Applicant on POSCO Daewoo Corporation located in Korea for quality issue will be treated as "....
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....overed as business. It has also been provided that any activity or transaction falling in above categories would be business whether or not there is volume, frequency, continuity or regularity in transactions. However, the terms in the course of business' has not been defined under the GST Law and therefore, the Applicant has to rely on the dictionary meaning. As per Oxford Dictionary, "in the course" means during and as a part of the specified activity, Accordingly, any expenses incurred during and as a part of carrying out the business activity will be considered as incurred in the course of business". In the present case, as per POSCO group policy, the MD and the GM are deputed to India considering the business requirement and smooth functioning of business for the Applicant using the skill sets of the MD and the GM. Therefore, considering the following, the Applicant is of the view that the said hotel expenditure has been incurred in the course of business". 1. Hotel accommodation is provided as per the terms of deputation contract & POSCO group policy so as to provide strong incentive so that the MD & the GM can continue the convenience of comfortable life in t....
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....dering this scenario, staying in a common area/' locality is useful since, they can have group discussions for managing business smoothly without having to spend their productive time on travelling. Considering this aspect, it is worth important to submit here that deputed key personnel of other POSCO group companies in India stay in the same hotel. Separately, since the hotel is also used by executives of other business enterprises as well, it aids in developing new business connections and thereby contributes to the growth of the business. Considering the above submissions, the Applicant is of the view that the primary objective of providing hotel accommodation is purely business growth. Therefore, GST paid on Such hotel expenses should be allowed as input tax credit under Section 16(1) of the CGST Act, 2017. APPLICANT'S SUBMISSION FOR QUESTION - 2 In respect of the transaction mentioned above, the Applicant incurred losses where the goods imported from POSCO Daewoo Corporation, Korea did not meet the customer expectation or were defective. The Applicant had paid to POSCO Daewoo Corporation, Korea against their invoice and therefore, as per the contract, the A....
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....ised Tax Invoice for such quantified value of loss. Thus, the Applicant is of the view that the Applicant is "agreeing to the obligation to tolerate an act or a situation and against the said "service", has recovered the damages from POSCO Daewoo Corporation, Korea. Accordingly, the said transaction will be treated as a supply of service in terms of Section 7 of the CGST Act, 2017. Further, Section 2(6) of the Integrated Goods and Services Tax Act, 2017 (IGST Act 2017) has defined the term "export services". Definition is reproduced below for your ready reference: "Export of services" means the supply of any service when,-- (i) the supplier of service is located in India; (ii) the recipient of service is located outside India; (iii) the place of supply of service is outside India; (iv) the payment for such service has been received by the supplier of service in convertible foreign exchange; and (v) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8; The Applicant is of the view that the above service classified under agreeing to....
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.... Rules 2017). As per Section 15(5)(a)(iii) Of the CGST Act, 2017, employee and employer are treated as "related persons" and hence, valuation of the supply needs to be determined as per Rule 28 of the CGST Rules, 2017. As per Rule 28 of the CGST, Rules, 2017 'the value of the supply of goods or services or both between distinct persons as specified in sub-Section () and (5) of Section 25 or where the supplier and recipient are related, other than where the supply is made through an agent, shall (a) be the open market value of such supply; (b) if the open market value is not available, be the value of supply of goods or services of like kind and quality; (c) if the value is not determinable under clause (a) or (b), be the value as determined by the application of rule 30 or rule 31, in that order Provided that where the goods are intended for further supply as such by the recipient, the value shall, at the option of the supplier, be an amount equivalent to ninety percent of the price charged for the supply of goods of like kind and quality by the recipient to his customer not being a related person Provided further that where the recipient is eligibl....
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.... and Services Act, 2017? If the said recovery amounts to "supply", what will be the time of supply and value of the said supply? Whether the applicant can claim input tax credit of GST charged by the insurance company? The question wise comments are submitted as under: Question No. 1 : Whether Input Tax Credit is admissible in respect of GST paid for hotel stay in case of rent free accommodation provided to General Manager (GM) and Managing Director (MD) of the company? Comment on Question No. 1: No Input Tax Credit (ITC) is admissible in respect of hotel stay/ Loading-Boarding/ Accommodation service as the same is meant for persona! consumption. As per the provisions of Section 17(5)(9) of Central Goods and Services Act, 2017,input tax credit is not be available in respect of the 'Goods or services or both used for personal consumption". Question No. 2: Whether invoice for quality claim raised by the applicant on POSCO Daewoo Corporation located in Korea will be treated as "export of service"? Comments on Question No. 2: The applicant's act of "tolerating the act of loss on defective goods" would be treated as supply of service as provided in point no. 5(e) ....
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....Sh. Kedar Joshi, consultants along with Sh. Suraj Maske, A.G.M., appeared and requested for admission of application as per contentions in their ARA and made written submissions. Jurisdictional Officer, Sh. Rishi Prakash, Inspector, Pune -I Commissionerate appeared and made written submissions. The application was admitted and called for final hearing on 21.08.2018, Sh. Manoj Joshi, consultants along with Sh. Suraj Maske, A.G.M., appeared and made oral and written submissions. Jurisdictional Officer, Sh. V. V. Sonar, Supdt., Pune-I Commissionerate appeared and stated that they have already made written submissions. 05. OBSERVATIONS We have gone through the facts of the case, documents on record and submissions made by both, the applicant and the department. The applicant has raised four question in the subject application. We shall deal with each question as under:- 1) Whether Input Tax Credit is admissible in respect of GST paid for hotel stay in case of rent free hotel accommodation provided to General Manager and Managing Director of the company? The applicant has submitted that as per POSCO group policy, key personnel like the Managing Director (MD) and General M....
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....(6) ....................... It is seen from a reading of the provisions of Section 17 (5) (g) as mentioned above that, cenvat credit cannot be availed when goods or services or both used for personal consumption. In the present case it is the submission of the applicant that the Hotel is used as a residential accommodation by the MD/GM which implies that the same is used for the personal consumption of the MD/GM. We find that providing residential accommodation in a Hotel is not in furtherance of their business. The MD/GM could have been provided with any other residential accommodation and still would have performed their duties for the applicant. In the case of a residential accommodation, as per the provision of the GST laws, GST is not liable to be paid on the rent received. It is the intention of the Govt. not to tax the rent paid by any person, when the rent is paid for any place of residence. In this case if the MD/GM were staying at any residential place or society, the applicant would have paid only rent without GST. It is seen that the applicant has made various submissions supporting their contention that Input Tax Credit is admissible in respect of GST paid for....
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.... that the applicant, after importing goods and after paying IGST thereon and further after claiming cenvat credit of IGST has sold the goods to their customer who has found the goods to be defective. Accordingly credit notes and debit notes have been exchanged by them but it is not known as to what has happened to the so found defective goods, whether the same was returned back to the applicant or not. The goods were imported by the applicant from POSCO, Korea, and at the time of receipt of goods no defect seems to have been noticed by the applicant and therefore there is no reason for them tolerating any act. Further the defect has been noticed by their customer and therefore it is their customer who is tolerating their act of having sent defective goods. It is also seen that the applicant has availed credit of IGST paid on such imported goods. They have not stated what is the status of such credit availed. It has also been submitted by them in Annexure -I to their application that they are primarily engaged in distribution of steel coils. In certain cases, they also perform low value-added processing function in respect of some of the traded goods based on customer's requirem....
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....y are of the view that the insurance premium is paid by the Applicant to the insurance company to provide output insurance service to its employees. Accordingly, the Applicant should be entitled to 100% ITC on the insurance premium paid to the insurance company in terms of Section 17(5)(b)(iii) of the CGST Act, 2017. 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....