TaxTMI 
TaxTMI 
2019 (6) TMI 1236
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.... to non fulfilment of certain contract conditions. c) Security deposit left unclaimed by the suppliers and recognised as income after 3 years. d) Food and beverages supplied at industrial canteen inside the factory premises. e) Community hall (Multipurpose Hall) provided on rental basis to employees of our organisation. f) School bus facility provided to children of the employees. g) Conducting exams for various vacancies. h) Rent recovered from residential quarters of employees. 2) Whether Input Tax Credit on expenditure on the goods and services consumed by our organisation in following activities shall be available: a) Maintenance of garden inside the factory premises. b) Maintenance and upkeep activities relating to gardens, parks, playgrounds factory school for children of employees, hall for recreational activities, residential quarter buildings of employees, roads, footpaths, street lightings and other parts of estate area that are located outside the factory premises but within the factory estate. c) Medicines purchased by the hospital maintained by our organisation and used for treatment of....
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....T 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 questions raised: 1) Ordinance Factory Bhandara is a unit of Ordnance Factories Board (OFB) functioning under the Department of Defence Production and Supply of Ministry of Defence, Government of India. There are 41 Ordinance factories in India in total, each engaged in different activities like production of finished products and their parts relating to arms, ammunitions, explosives, military clothing etc. Established in the year 1960, the main business of OFBa is to manufacture Propellants and Commercial Explosives for use by sister factories for production of finished products like arms and ammunitions that are ultimately supplied to Indian defence and military forces. Thus, OFBa majorly acts as a feeder factory for goods such as explosives and propellants for its sister Ordnance Factories that use such goods for production of finished goods. However, some of the manufactured goods are also directly supplied to depots and units of defence and military forces, as per requirement. OFBa also sells a small....
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.... recovered from such guests for their stay on per day basis that are different for such different guest houses. 7) The factory estate is huge and some portion of it has been let out on leasehold basis for commercial purposes like daily needs shops, banks etc. Our organisation collects lease rentals from the tenants of such let out immovable property. 8) Other allied establishments like local accounts office & SQAE are also functioning for the factory & within the factory. These organisations though a separate entity, they are units of the Central Government and function for OFBa. Local accounts office provides services related to accounting of transactions of OFBa, payment of bills of OFBa etc. to OFBa & SQAE provides services related to quality control & checking of products of OFBa. The cost of salary & other expenses related to such allied establishments is included in the total cost of manufacturing of final products of OFBa & thus forms part of the value of taxable supply. Employees of such establishments are also provided residential quarters for accommodation and monthly license fees is collected from them in respect of such accommodation. The employee strength of such....
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....rs subordinate to him in accordance with the Constitution. Further, in terms of Article 77 of the Constitution, all executive actions of the Government of India shall be expressed to be taken in the name of the President. Therefore, the Central Government means the President and the officers subordinate to him while exercising the executive powers of the Union vested in the President and in the name of the President. Ordnance Factory Bhandara is an unit under the Ordnance Factories Board(OFB) functioning under the Department of Defence Production and supply of Ministry of Defence, Government of India. All the powers provided to our organisation's officers and decisions taken in our organisation are on behalf of the President of India. Thus, OFBa is a part of the 'Central Government' as per clause (23) of section 3 of the General Clauses Act, 1897. a) Liquidated damages deducted from the payments to be made to suppliers in case of delayed delivery of goods or services:- Our organisation deducts liquidated damages (L.D) from the payments to be made to its suppliers in case of delayed delivery of goods or services. As per para 5(e) of Schedule II to the CGST Act, 2017, "agree....
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.... para 5(e) of Schedule II to the CGST Act, 2017 or any other provisions of the CGST Act, 2017. Sr.No. 6 of the exemption list on supply of services as per notification no. 12/2017- Central tax(Rate) specifies that, "Services by the Central Government, State Government, Union territory or local authority excluding the following services- (a) services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than the Central Government, State Government, Union territory; (b) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; (c) transport of goods or passengers; or (d) any service, other than services covered under entries (a) to (c) above, provided to business entities" shall attract NIL rate of tax. Accordingly, the following services supplied by OFBa should attract NIL rate of tax since they are provided to non-business entities:- d) Food and beverages supplied at industrial canteen inside the factory premises: As per Clause 6 of Schedule II to the CGST Act, 2017, "supply, by way of or as part of any service ....
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....pect of immovable property. Thus, the service provided by the factory to its employee for letting them use cultural hall for their personal purposes falls within the definition of "Renting in relation to immovable property". However, keeping in view the above discussed Sr. No. 6 of the exemption list on supply of services as per notification no. 12/2017- Central tax(Rate), such services provided by OFBa attract 'NIL' rate of tax since the provider of service (OFBa) is a unit of the Central Government and the recipient of services(factory employees) are non-business entities. f) School bus facility provided to children of the employees: OFBa provides the service of pick and drop of the children of its employees from school located outside the factory via bus owned by the factory. Charges in terms of monetary consideration are recovered by the factory from its employees in lieu of such service provided to them. So, keeping in view the above discussed Sr. No. 6 of the exemption list on supply of services as per notification no. 12/2017- Central tax(Rate), such services provided by OFBa attract 'NIL' rate of tax since the provider of service (OFBa) is a unit of the Central Govern....
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....ties, residential quarter buildings of employees, roads, footpaths, street lightings and other parts of estate area that are located outside the factory premises but within the factory estate. c) Medicines purchased by the hospital maintained by our organisation and used for treatment of factory employees and their dependents. Expenditure on maintenances upkeep and other activities relting to such hospital. d) Expenditure related to maintenance and upkeep of guest houses maintained by organisation. e) Expenditure related to purchase of LPG cylinders used within industrial canteen. The basic question that is being asked here is that whether the following services received by the factory are covered under the definition of "input services" as per section 2(60) of the CGST Act, 2017 & whether such services can be considered to be falling within the scope of "used or intended to be used in the course or furtherance of business" as per section 16(1) of the CGST Act, 2017 so as to entitle OFBa to avail Input Tax of the said services. It is worthwhile to note here that Hon. Finance Minister of India stated at paragraph 5(b) of the Statement of Objects & Reaso....
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....t forms part of value of final products would be eligible for CENVAT credit. Thus, it can be construed to mean from such decision that where the input service used is integrally connected with the business of manufacturing the final product and the cost of that input service forms part of the cost of the final product, then credit of service tax paid on such input service would be allowable. Therefore, applying the same logic, in the GST regime, the said following services can be said to be satisfying the twin necessities for availing Input Tax Credit of GST in respect of expenditure on the said services; that is "input services" and "used or intended to be used in the course or furtherance of business" since as per section 2(17) of the CGST Act, 2017, the term "business" includes "manufacture". In fact, the scope of availing Input Tax Credit has been further widened under the GST regime to include all inputs and input services used in the course or furtherance of business vis-a-vis erstwhile CENVAT Credit Rules where admissibility of CENVAT Credit was restricted to input services used directly or indirectly, in or in relation to manufacture of final product. a) Mainten....
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....2015 (8) TMI 595 - CESTAT NEW DELHI, it was held by the Hon. Tribunal that Garden Maintenance Services qualify as input services. In Lifelong Meditech Ltd., Vs. Commissioner of Central Excise and Service Tax, Gurgaon II {2016 (44) STR 626 (Tri-Chan)} = 2016 (7) TMI 468 - CESTAT CHANDIGARH, it was held by the Hon. Tribunal that "horticulture services are directly related to the manufacturing activity by the appellant as without maintaining the garden, the appellant cannot run their factory. Therefore, I hold that the appellant is entitled to avail CENVAT Credit for horticulture services." In M/s, Orient Bell Ltd., Vs. Commissioner of Central Excise, Noida, reported in 2016 SCC Online CESTAT, 7923 = 2017 (1) TMI 840 - CESTAT ALLAHABAD, it was held by the Hon. Tribunal that So far as garden maintenance is concerned, the same is input service as it is a pollution control requirement and improves the aesthetics and overall atmosphere and thus is an expenditure in or in relation to manufacture. In Commissioner of Central Excise, Delhi III, Suzuki Motor Cycle India Private Limited {2017 (47) STR 85 (Tri-Chan) = 2016 (9) TMI 576 - CESTAT CHANDIGARH, it was held by the Hon. Tribuna....
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.... are procured in relation to the aforementioned establishment. The specific transactions in respect which ruling on entitlement of input tax credit is required is specified in the enclosed "Annexure A". We wish to submit that all such services are used by the employees of the factory. The Ordnance Factory Board decided to develop such residential facilities within the factory estate since the factory is located at a remote area and employees from different parts of the country are recruited to work over here in OFBa. The residential colony is an 'industrial township' and the appellant is responsible to provide all types of municipal services in the colony. If the employees are not provided a proper residential colony with all the aforementioned facilities and establishments, there would be no availability of proper staff and labour required for continuous manufacturing activities. Thus, such services procured in relation to such establishments are necessary for furtherance of business of our organisation since these services help in maintaining the basic living standard of the employees who in tum are responsible for running the day- to-day business of the factory. Cost of such ser....
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....ISSIONER OF C. EX. & S.T., JAIPUR-I = 2015 (10) TMI 2524 - CESTAT NEW DELHI, the Hon. Delhi bench of Tribunal held that the residential colony was constructed adjacent to the factory because of the reason that the factory manufacturing cement is located at a place which is away from the city. Unless the residential colony is constructed near the factory, the appellant will not be in a position to get the proper/adequate manpower for running its plant activities and thus set aside the order passed by the Id. Commissioner (Appeals) of denying CENVAT credit of service tax taken by the appellant on maintenance and repair work of their residential colony. In the case of CCE Meerut vs. M/s. Bajaj Hindustan Ltd., the dispute was in relation to allowance of CENVAT Credit of Service Tax paid on construction services to the respondent for construction of residential colony/dormitory located in the precinct of the factory. The Hon. New Delhi bench of the Tribunal held that construction of residential colony/dormitory adjacent to the factory premises was the necessity because of the location of the factory in a remote area, where if the accommodation is not provided to staff/workers, the co....
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....al, services related to construction, repair and maintenance of such roads is procured. Roads connect the various establishments within the factory premises; that is factory where manufacturing activity is done and administration building with various other establishments within the factory estate like residential quarters, market area and other establishments mentioned above. Thus, the Input Tax Credit related to expenses mentioned in "Annexure B" in relation to such inter-connected roads should be admissible on the following grounds: a) The road ranging from the main entrance gate from where the factory estate begins up to the factory premises is used for inward and outward transportation of raw materials & finished goods and is thus used in the course or furtherance of business. b) The roads within the factory estate; that is the establishments like residential quarters, hospital, guest houses, market area and all other establishments as mentioned above are also used for the purpose of business of OFBa since as argued above all such establishments are there for the benefit of employees of the factory & thus such roads are used in the course of business of OFBa.....
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....hich ruling on entitlement of input tax credit is required is specified in the enclosed "Annexure D". Hospital is run by OFBa and is also located within the factory estate but outside the precincts of the area where factory & administrative building is there. The medicines and other facilities are provided to employees of the factory without any consideration. Input Tax Credit on the inputs like medicines and others mentioned in "Annexure D" purchased by the factory for the hospital and expenditure on maintenance, upkeep and other activities also mentioned in "Annexure D" relating to such hospital should be admissible on the following grounds:- i) Hospital helps in keeping the employees fit and healthy, so that they can contribute for furtherance of business of OFBa. ii) As a part of welfare measure, it is necessary to provide the employees basic medicinal facilities within the factory estate itself since the factory is located at a remote location. iii) Cost of such medicines and expenditure on maintenance, upkeep and other activities relating to such hospital forms part of the cost of the final products and thus forms part of the value of taxable supply....
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.... is admissible to the appellant. In the case of L'Oreal India Pvt. Ltd. v. Commissioner of C. Ex., Pune-I [2011 (22) S.T.R. 89 - Mumbai)] = 2010 (11) TMI 143 - CESTAT, MUMBAI, it was held that the appellant is eligible for credit of guest house maintenance services since such services have nexus or integral connection with the business of manufacturing of the final product. In the case of Commissioner of C. Ex., Visakhapatnam Vs. Hindustan Zinc Ltd. [2009 (16) S.T.R. 704 (Tri. - Bang.)] = 2009 (4) TMI 129 - CESTAT, BANGALORE, it was held that Guest House is used for businessmen during visit to the company in connection with the business. It is indeed related to business activity. The appellants are rightly entitled for credit. e) Expenditure related to purchase of LPG cylinders used within industrial canteen and within the office:- LPG cylinders are purchased and used within:- (i) Industrial canteen: - The industrial canteen is used for providing food and beverages at subsidised rates to employees. Hence, such expenses of purchasing LPG cylinders should also be considered for the purposes of furtherance of business of OFBa and ITC should be allowed on such expe....
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....nce formation under the Ministry of Defence'. Lastly, defence Public Sector Undertakings, Defence research Organisation(DRDO) or any other organsation under the management of the Ministry of Defence, Government of India should also get covered under the term 'defence formation under the Ministry of Defence' and the aforementioned exemption should be applicable when goods are sent from the factory to such organisations. D) Question No. 4:- Whether exemption on payment of GST on transport of 'military or defence equipments' through a goods transport agency applicable to goods transported by our organisation? As per Sr. No. 21 of the Notification No, 12/2017- Central Tax (Rate), "Services provided by a goods transport agency, by way of transport in a goods carriage of defence or military equipments" are exempt from the levy of GST. The term 'defence or military equipment' has not been defined in the CGST Act, 2017. As per Oxford dictionary, the word equipment means 'the necessary item for a particular purpose'. Hence the term 'defence or military equipment' should mean items/goods that are to be used by Indian defence or military forces. So, the question arises that whe....
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....ferred from stock:- The factory also uses GTA services for transporting goods that are not manufactured by it but are issued from its stock. Such goods maybe anything that are lying in the stock of the factory. Such goods are transported to the following:- i) Transport to sister Ordnance factories: - When such goods are transported to sister Ordnance factories, then the goods should get covered under the term 'defence or military equipment' since Ordnance factories are part of the Department of Defence Production, Ministry of Defence. ii) Transport to Research institutions: - When such goods are transported to research organisations like DRDO, ARDE etc., then also the goods should get covered under the term 'defence or military equipment' since such research institutions are also a part of Ministry of Defence. iii) Transport to private entities: - When old used goods & scrap are sold through auction process to private entities and transportation of such goods is carried out through GTA, then also such goods should get covered under the term 'defence or military equipment' since the supplier of goods is our organisation which is a part of the Department....
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....re was specific provision for reversing the CENVAT credit availed on inputs contained in finished goods lost as well as availing the remission of duty. This was due to the fact that the excise duty was levied on the "manufacture". Since the liability had already arisen, the remission was to be taken and credit already availed was required to be reversed in view of the specific provision. There is no such provision in GST regime. Also, the liability is linked to "supply" rather than "manufacture". The liability to pay tax arises on "Supply" under the GST regime. As per section 7(1) of the CGST Act, 2017, the expression "supply" includes all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal. Thus, dispatch of samples of finished goods for quality testing purposes to proof establishments and the consumption of such goods during such testing process does not fall in the definition of "supply" since such dispatch cannot be classified as sale, transfer, barter, exchange, licence, rental, lease or disposal. Therefore, in view of this, the reversal of tax on the ITC cannot be demanded on the input content in the fin....
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....iability of the factory as per 2nd proviso to section 16(2) of the CGST Act, 2017 due to non-payment towards the value of supply to the supplier in respect of which such input tax credit was availed by the factory. G) Question No. 7:- Being a part of the Ministry of Defence, Government of India, whether the following notifications are applicable to our organisation and what shall be the impact of such notifications:- a) Notification No. 2/2018- Central Tax (Rate), in relation to services by an arbitrator or an advocate to our organisation. b) Notification No. 3/2018- Central Tax (Rate), in relation to services supplied by our organisation by way of renting of immovable property to a person registered under the Central Goods and Services Tax Act, 2017. c) Notification No. 36/2017 - Central Tax (Rate), in relation to payment of tax on reverse charge mechanism on sale of used vehicles, seized and confiscated goods, old and used goods, waste and scrap to a GST registered person. Applicability and impact of the following notifications:- a) As per Notification No. 2/2018-Central Tax (Rate), services by an arbitrator or an advocate to the Central Govern....
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....property, Manpower supply and security Services & Transport of goods by road Services. b) Rate/ rates of Service Tax as applicable to services provided: @15% adv. (including of SB Cess and KK Cess). (c) Details of benefits of Notification of Service Tax if any availed- NIL. 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- As per available records No application/order was made under Central Excise & Service Tax in respect of M/S. General Manager, Ordnance Factory, Jawaharnagar, Bhandara on account of Advance Ruling. 7. Copy of show Cause Notices/ Adjudication order in respect of Central Excise or Service tax if any issued during last five years, in case of your company/ related company or sister concern. The Demand for the period 12-13 to 2015-16 of Service tax of Rs. 2,98,473/- on account of security deposits recovered/forfeited from the contractors for the reasons of non-fulfillment of contract/agreements has been confirmed against M/s. General Manager, Ordnance factory, Jawaharnagar, Bh....
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....ating non-performance of a contract for which consideration in the form of fines or liquidated damages is payable to the Central Government, State Government, Union Territory or local authority under such contract. Hence, the ordnance factory is not liable to get exemption under Notification No. 12/2017-Central Tax(rate) dated 28-06-2017. Ques.1 (b) whether Ordnance Factory Bhandara (OFBa) is liable to pay GST on Amount of Security deposit forfeited of suppliers due to non-fulfillment of certain contract conditions:- Legal Submission by Department:- As per the provisions of section 15 (2) (d) of CGST Act, the value of supply shall include interest or late fee or penalty for delayed payment of any consideration for any supply. Further, as per the Section 2(31) of CGST Act, "consideration" means any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the central Govt. or state Govt. It is noticed that the applicant has forfeited Security deposited of suppliers due to non-fulfi....
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....fication 11/2017-CT dated 28.06.2017 amended by notification No. 46/2017 dated 14.11.2017, the supply of food and beverages is covered under the category of catering services, which is taxable under GST regime. The taxability of GST on supply of food and beverages in the premises of industrial units/offices has also been confirmed by the Authority of Advance Ruling Chennai vide order No. 9/AAR/2018 dated 30.08.2018 = 2018 (9) TMI 1335 - AUTHORITY FOR ADVANCE RULING, TAMILNADU. Copy of same is enclosed for the ready reference. Ques. 1(e) whether Ordnance Factory Bhandara (OFBa) is liable to pay GST on Community hall (Multipurpose Hall) provided on rental basis to employees of our organization being a Govt. organization:- Legal Submission by Department :- As per the schedule II (Section 7) of CGST Act 2017, renting of immovable property shall be treated as supply of service. In the applicant's own case, they have provided Community hall( Multipurpose Hall) on rental basis to their employee shall be covered under the definition of supply of services as defined in CGST Act 2017 and hence they are liable to pay GST on the amount charged by them from their employee towards the rent....
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.... Maintenance of garden inside the factory premises of the applicant. Such taxable service received by the applicant is not covered under the negative list of Section 18(5) and hence input tax credit shall be available to them. Ques. 2(b) whether Input Tax Credit on Maintenance and upkeep activities relating to gardens, parks, playground, factory school for children of employees, hall for recreational activities, residential quarter buildings of employees, roads, footpaths, street lightings and other parts of estate area that are located outside the factory premises but within the factory estate shall be available to them. Legal Submission by Department:- As per the section 16 of the CGST Act, every registered person shall be entitled to take credit of input tax charged on any supply of goods and services or both by him which are used or intended to be used in the course of furtherance of his business and said amount will be credited to the electronic credit ledger of the such person. However the applicant has received services from the service provider towards the maintenance and upkeep activities relating to gardens, parks, playground, Factory school for children of employee....
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....d its supply. The said activities may be welfare activity undertaken while carrying on the business but to qualify as input service, the activity must have nexus with the business of applicant. The expression "in course or furtherance of business" appearing in section 16(1) of GST Act refers to activities which are integrally related to the business activity and not welfare activity. Hence no ITC is available on such supplies of services. Ques. 2(e) whether Input Tax Credit on Expenditure related to purchase of LPG cylinders used which industrial canteen maintained by organization shall be available to them Lega Submission by Department :- As per the section 16 of the CGST Act, every registered person shall be entitled to take credit of input tax charged on any supply of goods and services or both by him which are used or intended to be used in the course of furtherance of his business and said amount will be credited to the electronic credit ledger of the such person. However if the applicant has purchased LPG cylinders for using in their office for the preparation of foods and beverages for their employee. The said activities are neither relating to business nor relating to....
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....ct, 2017, the ITC is available to recipient subject to actual payment equal to supply of goods made to such supplier. If the recipient make lesser payment towards liquidated damages from supplier, the recipient is eligible to take ITC proportionally equal to actual made to such supplier. Hence the applicant is require to reverse ITC to that extent. Ques. (7)(a) Being a part of the Ministry of Defence, Government of India, what is the impact of the Notification No. 2/2018- Central Tax (Rate), in relation to services by an arbitrator or an advocate their organization. Legal Submission by Department:- As per Sr.No.45 of the Notification No. 12/2017 Central Tax (Rate) dated 28^th June,2017 as amended by Notification No. 02/2018-CT(rate) dated 25-01-2018, the services provided by an arbitral tribunal to (i) any person other than a business entity or (ii) a business entity with an aggregate turnover up to twenty lakh rupees (ten Iakh rupees in the case of special category states) in the preceding financial year, will be NIL in respect of intra-State Supply of Service. The said exemption is to be verified with the actual services received from advocate considering the fact that said....
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....owever the applicant has hired the service for passenger vehicles hired by organization. The said activities are neither relating to business nor relating to manufacture of final products and its supply. The said activities may be welfare activity undertaken while carrying on the business, but to qualify as input service the activity must have nexus with the business of applicant. The expression "in course or furtherance of business" appearing in section 16(1) of GST Act refers to activities which are integrally related to the business activity and not welfare activity. Hence no ITC is available on services of passenger vehicles hired by their organization. It is therefore, requested to decide the applicants application on the basis of facts and submission made by the revenue in the interest of law. 05. HEARING The Preliminary Hearing in the matter was held on 28.11.2018. Sh. Deodatta Sahu Jr. Works Manager appeared and requested for admission of application as per contentions made in their application. Jurisdictional Officer did not appear but report was submitted. The application was admitted and called for final hearing on 18.12.2018. Sh. Sagar Sahawani,C.A, along....
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....dia, whether our organization Ordnance Factory Bhandara (OFB) is liable to pay GST on the following supply of services.- a) Liquidated damages deducted from the payments to be made to suppliers in case of delayed delivery of goods or services. b) Amount of Security deposit forfeited of suppliers due to non-fulfilment of certain contract conditions. c) Security deposit left unclaimed by the suppliers and recognised as income after 3 years. d) Food and beverages supplied at industrial canteen inside the factory premises. e) Community hall (Multipurpose Hall) provided on rental basis to employees of our organisation. t) School bus facility provided to children of the employees. g) Conducting exams for various vacancies. h) Rent recovered from residential quarters of employees." Answer : With respect to question no. I (a) above, we find that Sr. No. 62 (heading 9991 or 9997) of Notification No. 12/2017- Central Tax (Rate) dated 28^th June 2017 provides NIL rate of Tax in respect of services provided by the Central Government, State Government, etc. by way of tolerating non-performance of a contract for which con....
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....d and beverages to their employees and also charging consideration for the same. The service code (Tariff Group/Heading) for such services is 9963 and the same is taxable under GST. As per Notification 11/2017-CT dated 28.06.2017 as amended, supply of food and beverages is covered under the category of catering services, which is taxable under GST regime The applicant's claim that Sr. No. 6 of the exemption list on supply of services as per notification no. 12/2017- Central tax (Rate), is applicable to them is not acceptable in view of the fact that as discussed above they are not Central Government. With respect to question no. 1 (e) above we find that as per the schedule II (Section 7), 5 (b) of CGST Act 2017, renting of immovable property shall be treated as supply of service. The applicant has provided Community hall (Multipurpose Hall) on rental basis to their employees which is covered under the definition of supply of services as mentioned above and they are liable to pay GST on the amount charged by them from their employees for supplying such services. For reasons mentioned in the foregoing the applicant is not entitled for any exemption under Notification No. 12/2017-C....
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....e of GST Laws, is to avoid cascading effect of taxes. Under this credit of tax paid is allowed as allowed to be availed and used for payment of tax at subsequent stages. Section 16 to Section 21 of the CGST Act deals with conditions for availment, use and recovery of such ITC by businesses. As per the section 16 of the CGST Act a registered person, in this case the applicant, is entitled to take credit of input tax charged on any supply of goods and services or both which are used or intended to be used in the course of furtherance of their business. Section 16 (2) to (4) of the CGST Act restricts availment of ITC in certain cases. Section 17 of the CGST Act deals with apportionment of credit in some cases (credit used for both, business and other purposes) and blocked credits (cases when ITC is not available).keeping the said provisions of ITC in mind we now take up the next set of questions raised by the applicant. With respect to question 2 (a) we find that as per the Section 16 of the CGST Act the applicant, being a registered person is entitled to take credit of input tax charged on any supply of goods and services or both received by them, which are used or intended to be ....
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....siness. As such in view of the provisions of Section 17 (5)(g), no ITC is available to the applicant. Hence, we hold that they are not eligible for ITC on taxes paid for maintenance and upkeep of guest houses. With respect to question 2 (e) we have to state that we have already held that their canteen is in providing services related to supply of food and beverages to their employees and also charging consideration for the same and therefore such service is taxable under GST regime. The LPG cylinders are used to provide such services related to supply of food and beverages to their employees and therefore we are of the opinion that they are eligible to avail ITC on the purchase of LPG cylinders. Question No. 3:- Whether the exemption to a 'defence formation' for preparation and generation of E- way bills is applicable to Ordnance factories & other Central Government & Public Sector Undertakings(PSU's) that function under the Ministry of Defence, Government of India ? As per para 14(k) of Rule No. 138 of the CGST Rules, 2018(Notification No. 12/2018 - Central Tax), e-way bill is not required to be generated when any movement of goods is being caused by defence formation und....
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....cially in the case of drugs). The interpretation as made out by the applicant that reversal of ITC will arise only if the inputs or capital goods are themselves lost, stolen or destroyed etc. and not where the finished goods are lost, stolen or destroyed etc. is not acceptable for the simple reason that Section 16(1) contemplates both the situations i.e. case where the goods are actually used or intended to be used. To arrive at the conclusion that the applicant's submission is not tenable, we find that where inputs are used, they cease to exist and they being destroyed, lost or stolen, etc. will not arise. We therefore conclude that once the inputs are used in the manufacture of final products, which are then sent for testing purposes, then in such a case the said inputs cannot be considered to have been destroyed. F) Question No. 6:- Whether proportionate Input Tax Credit has to be reversed in cases where lesser payment is made to the supplier due to deduction on account of liquidated damages from supplier's dues? As per 2^nd proviso to section 16(2) of the CGST Act, 2017, where a recipient fails to pay to the supplier of goods or services or both, the amount towards the....
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.... the date of notifications coming into effect. We have in our discussions above held that the applicant is not "Governments and therefore the said exemption is not applicable to them. With reference to question 7 (b) the applicant has submitted that as per Notification No. 3/2018-Central Tax (Rate), services supplied by the Central Government, State Government, Union territory or local authority by way of renting of immovable property to a person registered under the Central Goods and Services Tax Act, 2017 has been covered under reverse charge mechanism. They have submitted that since their organisation is a part of the Central Government, the notification is applicable to them. Renting of immovable property is to be treated as supply of service as per the provisions of Schedule II (Section 7) of CGST Act 2017. The applicant, who is no: 'Government' are giving nonresidential property on rental basis to a registered person under the CGST Act 2017, which is covered under the definition of supply of services as defined in CGST Act 2017 as supply of real estate services other than renting of residential dwellings and will be chargeable to tax under the GST regime. With refere....
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.... affirmative. (f) Answered in the affirmative. (g) Answered in the negative. Question :- 2) Whether Input Tax Credit on expenditure on the goods and services consumed by our organisation in following activities shall be available: a) Maintenance of garden inside the factory premises. b) Maintenance and upkeep activities relating to gardens, parks, playground, factory school for children of employees, hall for recreational activities, residential quarter buildings of employees, roads, footpaths, street lightings and other parts of estate area that are located outside the factory premises but within the factory estate, c) Medicines purchased by the hospital maintained by our organisation and used for treatment of factory employees and their dependents. Expenditure on maintenance, upkeep and other activities relating to such hospital. d) Expenditure related to maintenance and upkeep of guest houses maintained by organisation. e) Expenditure related to purchase of LPG cylinders used within industrial canteen. Answer :- (a) Answered in the negative. (b) Answered in the negative. (c) Answered in the ne....