TaxTMI 
TaxTMI 
2021 (7) TMI 654
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....he Ministry of Defence, Government of India? 3) Whether exemption on payment of GST on transport of 'military or defence equipments' through a goods transport agency applicable to goods transported by our organization? 4) Whether availing of eligible Input Tax Credit on inputs & input services relating to the main business activity of manufacturing is allowed against GST liability on renting of immovable property (which is an ancillary business activity)? (5) Whether Input Tax Credit is allowable in respect of food and beverages consumed in industrial canteen? (6) Whether Input Tax Credit is allowable in respect of manpower services hired for industrial canteen and LPG cylinders refilled for use in industrial canteen? 7) Whether Input Tax Credit is allowable in respect of medicines purchased in factory hospital and other inputs and input services used in factory hospital? 2. FACTS AND CONTENTION - AS PER THE APPLICANT The submissions, made by the applicant are as under:- A. Statement of relevant facts having a bearing on the question (s) raised: 1) Ordnance Factory Chanda (OFCh), the applicant, is a unit of Ordnance Factories Board (OFB) functioning under the Departme....
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....ospital, roads, school etc. 6) Expenditure on maintenance of Guest houses for stay of various persons visiting the factory is also incurred by the applicant organisation. 7) The factory estate is huge and some portion of it has been let out for construction of leasehold property for commercial purposes like daily needs shops and bank. Applicant organisation collects rent from such let out immovable property. B. Statement containing the Applicant's interpretation of law and /or facts I) For Question No. 1 : Is audit by a Chartered Accountant or Cost Accountant under section 35(5) of the CGST Act, 2017 applicable to applicant organisation for a) the F.Y 2017-18? b) the F.Y 2018-19 & succeeding financial years. It is requested that question No.1 may kindly be withdrawn. II) For Question No. 2: 'Whether the exemption to a 'defence formation for preparation and generation of E-wav 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 ....
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....y way of transport in a goods carriage of defence or military equipment" 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 whether the following category of goods shall get covered under 'defence or military equipment': Production Goods: OFCh uses services of Goods Transport Agencies (GTA) for transporting goods like propellant & explosives that are used in preparation of ammunition. Such goods are transported by OFCh to units of the defence forces, its sister Ordnance factories, proof establishments and other organisations under the Ministry of Defence, Government of India. i) Transport to units of the defence forces: -When such goods are transported to units of the defence forces then they should get covered under the term defence or military equipment since they are used directly by Indian defence and military forces and hence the aforementioned exemption shou....
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.... 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 of Defence Production, Ministry of Defence. D) For Question No. 4: Whether availing of Input Tax Credit (ITC) on inputs & input services relating to the main business activity of manufacturing is allowed against GST liability on renting of immovable property (which is an ancillary business activity)? As per section 2(17) of the CGST Act. 2017, "business" includes (a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit; (b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a); OFCh has let out several commercial establishments on rent in its estate. Such activity of letting of immovable commercial properly is incidental or ancillary to the main business activity of manufacturing....
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....der the Factories Act, 1948. So, an industrial canteen has been provided for its employees within the factory where the employees have food and beverages by paying a nominal amount of money on no-profit-no-loss basis. Thus, ITC should be allowable in respect of food and beverages consumed in industrial canteen. F) For Question No. 6: Whether ITC is allowable in respect of manpower services hired for industrial canteen and LPG cylinders refilled for use in industrial canteen? Reference is once again made to section 9 of the CGST Amendment Act 2018 as mentioned above. Since approximately 3000 person have been employed by OFCh and thus the aforementioned provision relating to maintenance of canteen is as per section 46 of the Factories Act, 1948 which is obligatory for OFCh to provide to its employees under the Factories Act, 1948. So an industrial canteen has been provided by OFCh for its employees within the Factory where the employees have food and beverages by paying a nominal amount of money on no-profit-no-loss basis. Also, as per section 16(1) of the CGST Act, 2017, "Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the m....
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....9 of the CGST Amendment Act. 2018 mentioned above as per which ITC shall not be available in respect of supply of health services except where the same is obligatory for an employer to provide to its employees under any law for the time being in force. It is submitted that as per Ordnance Factory Medical Regulations, it is mandatory for Ordnance Factories to provide occupational health services through Factory Hospital. Thus, as per the amended section 17(5) (h) of the principal CGST Act, 2017. ITC in respect of medicines purchased in factory hospital and other inputs and input services used in factory hospital should he allowed since such inputs and input services are used in respect of supply of health services to employees and their families that are mandatory to he provided under Ordnance Factory Medical Regulations. Additional Submission dated on 30.12.2019 1) For Question No. 1: Is audit by a Chartered Accountant or Cost Accountant under section 35(5 of the CGST Act, 2017 applicable to applicant's organisation for a) the F. Y 2017-18? b) the F.Y 2018-19 & succeeding financial years. It is requested that question No. 1 may kindly be withdrawn. 2) Question No. 2 mention....
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....anda. The ITC in relation to such maintenance activity of pipeline should be allowed in view of section 9 of the CGST Amendment Act. 2018 mentioned above 5) Question No. 6 mentioned above: It is requested to refer the enclosed "The CGST Amendment Act. 20I8" for this question. 6) Question No. 7 mentioned above: It is requested to refer the enclosed "The CGST Amendment. Act, 2018" for this purpose. Refer Page 8 of such enclosure wherein it is clearly mentioned that: *All employees working in Ordnance and Ordnance Equipment Factories, their Allied Establishments will be entitled for occupational health services under OFMR including such services statutorily mandated under Factories Act. 1948. irrespective of the entitlement of the employee for healthcare under OFMR or otherwise. Such occupational health services will be provided to them through Factory Health Clinics and Factory Hospitals attached to the Factory where the employee is working." Thus, it proves that provision of healthcare services to employees through factory hospital is mandatory and obligatory for the applicant under Ordnance Factory Medical Regulations and hence as per the amended section 17(5) (b) of the princ....
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....ctive States have drawn Rules with regard to the foodstuffs to be served in such canteen and the charges which may be made therefore. But it is not submitted by the Applicant whether applicant recovers some amount from employees towards foods provided in the canteen i.e. if there is an outward supply in the hands of the applicant, and if the Applicant is recovering/charging the amount in respect of food services supplied to the employees then. Entry No. 7(i) (read with Explanation 1 thereto) of Notification No. 11/2017- Central Tax (Rate) dated the 28.06.2017. as amended from time to lime, specifically post amendment vide Notification No. 13/2018-Central Tax (Rate) dated 26.07.2018, specifies that supply, by way of or as part of any service, of goods, being food or any other article for human consumption or any drink, provided at a canteen of an industrial unit, will be subject to GST @ 5%. provided that credit of input tax charged on goods and services used in supplying the service has not been taken. The said Notification being a rate notification and not an exemption notification, is not optional to the dealer. Hence ITC in respect of Food and beverages consumed in industrial ....
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....egulation and hence amended provision u/s 17(5)(b) of CGST/MGST Act, 2017 will become applicable thereto. But As per amended provisions of Section 17(5) (b) in view of C'GST Amendment Act, 2018 notified with effect from 01.02.2019. exception A is provided thereto ((A) the Government notifies the services which are obligatory for an employer to provide to its employees under any law for the time being in force;" but Medical hospital services provided are not covered under section 17(5) of CGST/MGST Act, 2017, hence not applicable here and sub section (2) of section 17 of the CGST/MGST Act, 2017 will be applicable and ITC has to be reversed in view of the same. 04. HEARING 4.1 Preliminary hearing in the matter was held on 02.01.2020. Shri Yatish Kumar. Works Manager and Shri Sugar Sahajwani, C.A appeared, and requested for admission of their application. Jurisdictional Officer was not present. 4.2 The case was fixed for online hearings on 17.12.2020 and 04.02.2021. On both the occasions the applicant requested for adjournment which was granted. 4.3 Final online hearing was further fixed on 29/06/2021. Shri Sagar Sahajwani, C.A attended on behalf of the applicant and made oral su....
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....ered under the provision of section 2(53) of the CGST Act. 2017 read with clause (8) of section 3 of the General Clauses Act, 1897 read with Article 53 & Article 77 of the Constitution of India. 5.6 The Hon'ble Appellate Advance Ruling Authority for Maharashtra, in the appeal filed by the Ordnance Factory. Bhandara. for reasons meant in their order, has also held that Ordnance Factory Bhandara. is 'Government' for all practical purposes. 5.7 In view of the above we now take up the questions raised by the applicant as under:. 5.8 Question No.1 has been voluntarily withdrawn by the applicant vide written submissions made on 30.12.2019. 5.9.1 Question No. 2 : Whether exemption to a 'defence formation' for preparation and generation of E-way bills is applicable to Ordnance factories & other Central Government & Public Sector Undertakings (PSl's) that function under Ministry of Defence, Government of India? 5.9.2 During the course of the hearing it was informed by the applicant that the question pertained only to themselves. Rule 138 of the GST Rules. 2017 provides for information to be furnished prior to commencement of movement of goods and generation of E -way bill. As per para ....
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....now take up the remaining four questions raised by the applicant. 5.12.1 Question No.4: Whether availing of eligible Input Tax Credit on inputs & input services relating to the main business activity of manufacturing is allowed against GST liability on renting of immovable property' (which is an ancillary business activity)? 5.12.2 It has been submitted that the applicant has let out several commercial establishments on rent in its state and GST liability is regularly discharged by the applicant thereon. 5.12.3 As per section 2(17) of the CGST Act. 2017, "business" includes (a) any trade, commerce, Manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit; (b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a); 5.12.4 As per section 17 of the CGST Act. 2017. where the goods or services or both are used by the registered person partly for the purpose of any business and partly lor other purposes, the amount of credit shall be restricted to so much of the input tax as is attributable to the purposes of his business. Thus, from the above, it becomes clear that the in....
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....under Sections 17(2) of the CGST Act. 2017. Therefore, the Applicant is not entitled to avail ITC in respect of such expenditures. The Hon'ble Appellate Authority for Advance Ruling, Maharashtra in its order No. MAH/AAAR/SS-RJ/13/2019-20 dated 18.10.2019. passed in respect of appeal filled by Ordnance Factory Bhandara, in a similar issue has also held that the provisions of Notification No. 3/2018 Central Tax (Rate) dated 25.1.2018 was applicable to Ordnance Factory Bhandara. 5.13.1 Question No.5: Whether Input Tax Credit is allowable in respect of food and beverages consumed in industrial canteen? 5.13.2 As per Clause 6 (b) of Schedule II to the CGST Act. 2017. "supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration shall be treated as a supply of services. There is an industrial canteen inside the factory premises that serves food and beverages to employees of the factory. Nominal charges for such food and beverages are recovered from t....
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....ite or mixed supply. But in the present case, the applicant's outward supply is exempted by notification. Therefore, provisions of newly amended Section 17 (5) (b) of CGST ACT is not applicable to these specific transactions of applicant. Hence ITC is not available on this transaction to the applicant. 5.14.1 Question No.6: Whether Input Tax Credit is allowable in respect of manpower services hired for industrial canteen and LPG cylinders refilled for use in industrial canteen? 5.14.2 To run the canteen, applicant requires manpower services and also requires L.PG cylinders refilled whereon GST paid by applicant. The procurement of inputs (goods) and input services are used for the rendering of output supply of canteen foods and other items which, in terms of the aforementioned Sr. No. 6 of the exemption list on supply of services as per notification no. 12/2017-Central fax (Rate), is "supply of services by the Central Government to non business entities attract NIL rate of tax". Since such supply of food and beverages are made to factory employees, who are non-business entities, the charges recovered by the factory from such employees for such supply attracts NIL rate of tax. sin....
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....s under any law for the time being in force. 5.15.3 In light of section 9 of the CGST Amendment Act, 2018. which amends section 17(5)(b) of the CGST Act. 2017 as stated above, we are of the opinion that Applicant is not entitled to avail the ITC (up to 01.02.2019) in respect of inputs like medicines, and input services etc. consumed in the hospitals to provide the health services to its employes and their dependents as per the terms of the Ordnance Factory Medical Regulations. Section 9 of the CGST Amendment Act. 2018, which is in effect from 01.02.2019. has inserted this condition, wherein the ITC in respect of health services will be available to the employer provided such health services are obligatory for the employer to provide to its employees under any law for the time-being in force, which, prior to this amendment act. was not available to any registered person under section 17(5) (b) of the CGST Act. 2017. 5.15.4 Considering the amended provision of Section 17(2) of CGST Act. ITC would be available in respect of medicines purchased in factory hospital and other inputs and input services used in factory hospital with effect from 01.02.2019. The same view has been taken by....