TaxTMI 
TaxTMI 
2021 (12) TMI 999
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.... (hereinafter also referred to as the "appellant") against the order of Authority for Advance Ruling No.02/2021 dated 07.06.2021. 3. BRIEF FACTS OF THE CASE i. M/s Bharat Oman Refineries Limited (BORL) is a Company registered under the Companies Act, 1956 with Registrar of Companies, Gwalior and is carrying on the business of Refining of Crude Oil in the Refinery located at Village Agasod, Bina, District Sagar, Madhya Pradesh ii. M/s Bharat Oman Refineries Limited is head quartered at Village Agasod, Bina, District Sagar (M.P.) iii. The appellant is registered under the provisions of GST law in the State of Madhya Pradesh, vide GSTIN: 23AABCB7084M1ZH and the principal place of business is in Gautam Nagar, BHOPAL - 462023. iv. M/s BORL is a deemed Public Sector Undertaking, as the holding company, M/s Bharat Petroleum Corporation Limited (BPCL) has 51% paid up capital in the company. v. The application u/s 97 of the Act seeking Advance Ruling was made before the Authority for Advance Ruling- Madhya Pradesh. The issues on which the Advance Ruling were required:- I. Whether GST is applicable on payment of notice pay by an employee to the applicant employer i....
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....t of question Nos. II, III & IV, or ITC will be restricted to the extent of GST borne by the applicant-employer? vi. Whether the provision of canteen services to all the employees without charging any amount (free of cost) will fall under Para 1 of Schedule III of GST Act and will not be subjected to GST? vii. If reply to Q. VI is yes, whether in view of the explanation to Section 17(3) of GST Act, ITC shall be available to the applicant on the goods and services used in the activity of provision of free canteen services to the employees? 5. RULING PRONOUNCED BY AUTHORITY FOR ADVANCE RULING (AAR) i. In respect to Question Number 1, We are of view that GST is applicable on payment of notice pay by ah employee to applicant employer in lieu of notice period under clause 5(e) of schedule II of CGST Act. ii. In respect to Question Number 2, we are of view that the premium of Group Medical Insurance Policy recovered by applicant from the non-dependent parents of employees & retired employees will fall within the ambit of supply and is liable to GST. iii. In respect to Question Number 3, This Authority holds that as per Section 15(1) of GST Act, the value of ....
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....of the GST Act. 6. QUESTIONS RAISED BEFORE THE APPELLATE AUTHORITY FOR ADVANCE RULING (AAAR) The following question, which is the very same as posed before AAR, have been posed before the Appellate Authority: - i. Whether GST is applicable on payment of notice pay by an employee to the applicant - employer in lieu of notice period under clause 5(e) of Schedule II of GST Act? ii. Whether GST is applicable on the amount of premium of Group Medical Insurance Policy recovered at actuals from non-dependent parents of employees and retired employees those who are covered under the said Policy? iii. Whether GST is applicable on recovery of nominal amount for availing the facility of Canteen at the Refinery at Bina when when it is not a supply as per clause 1 of Schedule II of GST Act? iv. Whether GST is applicable on recovery of telephone charges from the employees over and above the fixed rental charges payable to BSNL? v. Whether full ITC is applicable to the applicant in respect of question Nos. II, III & IV or ITC will be restricted to the extent of GST borne by the applicant-employer? vi. Whether the provision of canteen ser....
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....that such activity rendered by the appellant is not covered by the definition of "business" as provided in section 2(17) of the CGST Act . iv. Appellant submits that the Id. AAR has failed to consider the submissions made by the appellants that it does not possess the requisite license for providing the insurance services and therefore the said activity of recovery of insurance premium from the employees is not in the course or furtherance of business of the appellant. Hence, it is prayed that the findings recorded by the Id. AAR may kindly be set aside. v. Appellant submits that the Id. AAR has erred in holding that the recovery of nominal amount for availing the facility of canteen by the employees is liable for GST. The Id. AAR has held that the transaction of recovery of nominal amount for availing the canteen facility by the employees shall be covered under clause (b) of section 2(17) of the Act as a transaction incidental or ancillary to the main business of the applicant and is therefore covered under the definition of" outward supply " which is liable to tax. vi. Further, Appellant submits that the Id. AAR has observed that the interpretation by t....
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....rcel of the cost to company). xiv. Appellant submits that the Id. AAR has erred in concluding that the canteen services provided to the employees are to be treated as supply, even if there is no consideration and it is liable to tax as per the value determined in accordance with Rule 28. xv. Appellant submits that the Id. AAR has failed to take into consideration the Press Release dated, 10.07.2017 issued by CBIC, as the consideration of this Press Release would have resulted in the conclusion, that the providing of free canteen services to its employees shall be covered by Para 1 of Schedule III of CGST Act and therefore, it is neither supply of goods nor supply of services. Hence, the findings recorded by the Id. AAR are not correct and not according to the law. Hence, it was prayed that the same may kindly be set aside. 8. PERSONAL HEARING The appellant was given an opportunity of personal hearing on 06.10.2021 through virtual mode. Shri S. Krishnan, has attended the personal hearing on behalf of the appellant. After hearing, the appellant has expressed his satisfaction through a letter and asked for decision. 9. DISCUSSION AND FINDINGS We have care....
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....uld be liable to be taxed being paid for providing the service of forbearance to act. 4. The said query raised pertains to the opposite situation i.e. where the employer pays the employee for premature termination of service and in this situation it was clarified that premature termination was treatable as amounts paid in relation to services provided by the employer in the course of employment. As regards the present situation where the employee had paid the employer for waiver of notice period, the matter had come up before the hon'ble Madras High Court in W.P. Nos 35728 to 35734 of 2016 in the case of GE T&D India Ltd Vs Deputy Commr of Central Excise, LTU, Chennai. The hon'ble high court applying the CBEC's clarification observed that "the employer cannot be said to have rendered any service per se much less a taxable service and has merely facilitated the exit of the employee upon imposition of a cost upon him for the sudden exit". The hon'ble Court further held that ' the definition in clause (e) of Section 66E is not attracted to the scenario before me as, in my considered view, the employer has not 'tolerated' any act of the employee but has p....
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....ntion of the appellant company and documentary evidences produced on record. The issue put before us is in respect of whether the aforesaid activity undertaken by applicant is supply of services or not. We have observed as follows; 3. The applicant is a registered person under GST Act and is in the business of refining of crude oil in the refinery at Bina, Sagar District, M.P. 4. The applicant has taken a 'Group Medi-claim insurance policy' for all its employees as a welfare measure. Employees, spouse and children and dependent parents of employees are covered under this policy for which no recovery is made from the employees and same forms part of CTC. Apart from the above, the employees are given an option to enroll their non-dependent parents for availing benefit of this scheme. Retired employees are also given an option to avail the benefit. When employees include their non-dependent parents under the scheme, additional insurance premium is paid by the appellant company which is subsequently recovered from the salary of the employees at actuals. Similarly the amount is recovered from retired employees at actuals. The applicant states that they were not an insuranc....
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....shall he treated neither as a supply of goods nor a supply of services. (3) Subject to the provisions of sub-sections (1), (1A) and (2), the Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as (a) a supply of goods and not as a supply of services, or (b) a supply of services and not as a supply of goods" 7. Thus, in order to constitute a 'supply', the following elements are required to be satisfied:- (i) there should be supply of "goods" and / or services"; (ii) supply is for a "consideration"; (iii) supply is made "in the course or furtherance of business": 8. From the above, it is clear that any activity done against consideration is treated as supply however, such an activity must be in the course of business or for the furtherance of business. 9. The term "in the course of business" or "furtherance of business" is not defined under CGST Act. However, the term business has been defined in Section 2(17) of the CGST Act, 2017 which is reproduced below for ready reference :- "business" includes (a) any trade, commerce, manu....
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....ount for availing the facility of canteen at the Bina refinery? On this question, the Ld AAR has pronounced that facility of canteen services was liable to GST and valuation of canteen facility provided by the applicant to its employees shall be as per Rule 28 and not at the nominal amount recovered by the applicant from its employees. 2. The appellant has a manufacturing setup and maintains/manages industrial canteen for providing food and refreshments to its employees as they cannot leave the premises due to the nature of their work and the refinery is mandated to work round the clock. The appellant is required by law to maintain canteen facilities for its employees under Section 46 of the Factories Act, 1948. For this facility the appellant recovers Rs. 700/- per month from the salary of the employees as a standard deduction, irrespective of the fact whether the employees are availing canteen facility or not. The canteen facility has been outsourced and run by a canteen contractor. As the appellant has arranged to provide the food to its employees at subsidized rate (and not free of cost), the appellant collects some portion of the total amount of food price to be paid to the....
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....oyees against the amount collected from the employees. The appellant collects employees' portion of amount and pays the consolidated total amount, which includes appellant's share of amount also, to the Canteen Service Provider towards the foodstuffs provided to employees by the Canteen Service Provider. The appellant neither keeps any margin in this activity of collecting employees' portion of amount nor makes any separate supply to the employees. Furthermore, it is not the appellant who is supplying the foodstuff or canteen service to its employees, but it is a third party who is supplying the foodstuff or canteen service to the employees of the appellant. In our view, as the appellant is not carrying out the said activity of collecting employees' portion of amount to be paid to the Canteen Service Provider, for any consideration, such transactions are without involving any 'supply' from the appellant to its employees and is therefore not leviable to Goods and Services Tax. We observe that the MPAAR has ruled that the Goods and Services Tax is applicable on the amount recovered from employees, mainly on the premises that 'the appellant is supplying foo....
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....ered person partly for the purpose of any business and partly for 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. (2) Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies. (3) The value of exempt supply under sub-section (2) shall be such as may be prescribed, and shall include supplies on which the recipient is liable to pay tax on reverse charge basis, transactions in securities, sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building. Explanation.-For the purposes of this sub-section, the expression "value of exempt supply" shall not include the value of activities or transactions specified in Schedule III, except those specified in paragraph 5 of the said Schedule. (4) A....
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....sels or aircraft insured by him; (b) the following supply of goods or services or both- (i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) except when used for the purposes specified therein, life insurance and health insurance: Provided that the input tax credit in respect of such goods or services or both shall be available where an inward supply of such goods or services or both is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply; (ii) membership of a club, health and fitness centre; and (iii) travel benefits extended to employees on vacation such as leave or home travel concession: Provided that the input tax credit in respect of such' goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for the time being in forced (c) works contract services when su....
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....iding any outward supply of telephone services and the facility is also not attributable to the purposes of their business in terms of Section 17(1) of the CGST Act. b. Input credit of GST paid to the insurance provider would also not be available to the applicant- as health insurance is in the excluded category under Section 17 (5) of the CGST Act and as said insurance services are not any outward supply of the applicant. c. As regards provision of canteen facility we find that the appellant has submitted that the canteen facility was required to be provided by a company as per Section 46 of the Factories Act, 1948. Therefore applying the proviso under Section 17(5)(b) that the input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law, we are of the view that input credit of GST paid would be available to the appellant. Point No.6 - 1. Whether the provision of canteen services to all the employees without charging any amount (free of cost) will fall under Para 1 of Schedule III of GST Act and will not be subjected to GST ? 2. On this matter we f....