AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2021 (12) TMI 999
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....dvance 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 in lieu of notice period, under clause 5(e) of Schedule II of CGST Act. II. Whether GST is applicable on ....
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....yees 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 supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply where the supplier and the recipient of the supply are not related,....
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.... 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 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 in Q. 6 is yes, whether in view of explanation to section 17(3) of GST, ITC shall be available to the applic....
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....urance 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 the appellants relating to transaction falling under clause 1 of Schedule III is erroneous by stating that here employee is not providing any service rather employer is providing services to employees. vii. Appellant submits that the Id. AAR has failed to consider the submissions made by the appellants that the employer is provi....
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....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 carefully gone through the submissions made by the appellant in his application as well as the submission made at the time of personal hearing. Point no. 1- The first question raised by the applicant is that 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. On this point the Ld. AAR has found....
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....ion 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 permitted a sudden exit upon being compensated by the ' employee in this regard. Though normally, a contract of employment qua an employer and employee has to be read as a whole, there are situations within a contract that constitute rendition of service such as breach of a stipulation of non-compete. Notice pay, in lieu of sudden termination however, does not give rise to the rendition of service either by the employer or t....
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....y' 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 insurance company and it is not providing any insurance services to non-dependent parents of employees or to the retired employees. This service of insurance is actually provided by the Insurance Company and they were simply collecting insurance premium as a mediator. They state that collection of premium of insurance policy from persons is not the business of the appellant company. 5. We find from the documents of insurance scheme submitted on record tha....
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.... 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, 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); (c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction; (d) supply or acquisition of goods including capital goods and services in connection with commencement or closure of business, (e) provision by a club, association, society, or any such bod....
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....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 'Canteen Service Provider" from the employees, by deducting it from the salary of the employees. The appellant has submitted that it is only facilitating the supply of food to the employees, which is a statutory requirement under the Factories Act, 1948, and is recovering only employee's share towards actual expenditure incurred in connection with the food supply, without making any profit. 4. The appellant has referred to para 1 of Schedule III and states that it is part and parcel of employment contract between the employer and the employee. As such, it is services by an employee to the employer in the course of....
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....vice 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 food to its employees', which would be covered under the definition of the term 'business' under Section 2(17) of the Central Goods and Services Tax Act, 2017 and the Gujarat Goods and Services Tax Act, 2017. However, the appellant has asserted before us that it is collecting the portion of employees' share and paying to Canteen Service Provider, a third party, which is nothing but the facility provided to employees, without making any profit and working as mediator between employees and the contractor / Canteen Service Provider. Under these circumstances, we hold that the Goods and Services Tax is not applicable on th....
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....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 banking company or a financial institution including a non-banking financial company, engaged in supplying services by way of accepting deposits, extending loans or advances shall have the option to either comply with the provisions of sub-section (2), or avail of every month, an amount equal to fifty per cent, of the eligible input tax credit on inputs, capital goods and input services in that month and the rest shall lapse: Provided that the option once exercised shall not be withdrawn during the remaining part of the financial year: Provided further that the restriction of fifty per cent, shall not apply to the tax paid on supplies made by one registered person to ano....
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.... 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 supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service; (d) goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business. Explanation.- For the purposes of clauses (c) and (d), the expression "construction" includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property; (e) goods or services or both on which tax has been paid under section 10; (f) goods or services or both received by a non-resident taxable person except on goods imported by him; (g) goods or services or both used for person....
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....int 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 find that Schedule III pertains to activities or transactions which shall be treated neither as a supply of goods nor a supply of services. Clause 1 reads as under - 1. Services by an employee to the employer in the course of or in relation to his employment. Thus services by an employee to the employer in the course of or in relation to his employment have been placed out of the purview of GST. In this case canteen services are provided to employees by the employer. So this is not a case where some services have been provided by the employee to the employer. There is nothing on record to show that the said facility provided to employees is part of the wage structure. Therefore, we do not find any reason to hold that canteen facilities would fall under Schedule III of the CGST Act. However, at point no.3 we have held that canteen services would not be leviable to GST at the hands of the employer because of our findings that the employer was merely a facili....