TaxTMI 
TaxTMI 
TaxTMI 
2022 (1) TMI 903
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....same except for certain provisions. Therefore, unless a mention is specifically made to any 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, the expression 'GST Act' would mean CGST Act and MGST Act. 2. FACTS AND CONTENTION - AS PER THE APPLICANT FACTS: 2.1 M/s Syngenta India Limited, the Applicant, manufactures/sells pesticides, herbicides & various types of seeds and offers various incentives to its employees as a part of its employment policy, like group insurance policy for its employees, Parental Insurance Policy, etc. 2.2 Applicant issues employment letter ("Employment Agreement") to its employees, which contains various terms and conditions of employment. Applicant, in its General Employment Conditions ('HR Policy') also mentions the terms and conditions related to work, responsibility, termination, etc. Parental Insurance 2.3 Voluntary Parental insurance is provided to employees & whereas premium of the group insurance policy of the employees is completely borne by Applicant, the amount of the Parental Insur....
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....e Applicant would still be continuing. The parental insurance is provided by a third-party insurance company for which the insurance company is raising an invoice to the Applicant and charging GST on the same. Therefore, the service of parental insurance is provided by the third-party service provider only. 2.8.2 Hence, providing the parental insurance scheme is not a business activity of the Applicant and hence, the provision of such insurance to the employees cannot qualify as supply. Further, Applicant does not hold a license to carry out insurance business under the IRDA Act. 2.8.3 Applicant is neither a "insurance company" nor the Applicant qualifies as a "insurer". Therefore, the Applicant cannot be said to be engaged in the business of providing insurance services. 2.8.4 The Applicant submits that any activity which is incidental and ancillary to the main business activities should only be covered with the ambit of the definition of the term 'business'. In the present case, the parental insurance scheme is merely a facility extended to the employees. Hence, the said activity cannot be treated as 'business' as defined in Section 2(17) of CGST Act. 2.8.5 In....
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....ry made in lieu of parental insurance does not amount to supply. 2.9.2 Applicant recovers the amount of parental insurance scheme from the employees as per the standard terms and conditions agreed between them. 2.9.4 Also, the Press release issued by the Ministry of Finance dated 10 July 2017 states that, any services provided by the employer to the employees in terms of the contractual agreement entered into between the employer and employee will not be subjected to the GST. Therefore, Applicant submits that the parental insurance provided by the Applicant to its employees cannot be treated as 'supply' and therefore, GST should not be applicable. 2.10 Without prejudice to the above, it is settled position under GST regime that employee recoveries do not amount to 'supply'. 2.10.1 The Applicant submits that it is a settled legal position that the employee recovery would not qualify as 'supply' under GST and hence, not taxable. Reliance is placed in the case of M/s Jotun India Private Limited, [2019-TIOL-312-AAR-GST] and M/s POSCO India Pune Processing Centre Private Limited [2019 (2) TMI 63] 2.10.2 The understanding of the Applicant is supported by the ....
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....position under GST regime that employee recoveries do not amount to 'supply'. 2.12.1 The Applicant submits that the submission made by the Applicant in respect of parental insurance recovery equally applies so far as the notice pay recovery is concerned. 2.13 Notice pay collected by the Applicant from its employees are in the nature of compensation for damages for breach of contract. 2.13.1 As per Section 73 & 74 of the Indian Contract Act any breach of contract or non-compliance of any terms of the contract would result into payment of compensation as a legal course of action. Therefore, upon default on the part of the employees in complying with the employment agreement, the Applicant shall be entitled to receive damages compensation stipulated in the employment agreement in accordance with Section 73 and 74 of the Indian Contract Act, 1872. 2.13.2 The above provisions also cover the case of notice pay recovery. Therefore, the notice pay recovered by the Applicant can at best be treated as compensation towards the loss of the Applicant for the breach of the contract by the employee. 2.13.3 Reliance is also placed on Para 2.3.1. of 'Education Guide' dated 20.0....
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....he any activity or transaction which is undertaken in the course of employment or in connection with employment has been specifically excluded from the ambit of supply. Notice pay recovery is nothing more than deduction of the salary of the employees. Therefore, the same is an integral part of the salary benefits and deduction which is provided in the course of employment services. Hence, GST will not be payable on such recovery made by the Applicant. 2.15.3 Further, the Hon'ble Tribunal in the case of HCL Learning Ltd. [2019 (12) TMI 558] has also held that notice pay recovery is not liable to service tax. 2.15.4 Further, on perusal of the employment agreement, it can be clearly inferred that it is not the case that the agreement is entered into for providing notice pay terms and conditions. Hence, the agreement should be appreciated in its true spirit and to construe that the agreement is to provide the employment services by employee to the Applicant. 2.15.5 The Applicant relies on the case of Ishikawajima-Harima Heavy Industries v CIT [2007, 288 ITR 408, 440 (SC)], and Sundaram Finance Limited v State of Kerala [AIR 1966 SC 1178], 2.15.6 Reliance is also placed on the I....
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....ally agreed between the employer and the employee for breach of contract. It can be regarded as a consideration to the employer for 'tolerating the Act' of the employee to not serve the notice period. The condition to pay an amount as notice pay in lieu of notice period for the employer forms part of terms & conditions of employment. These activities covered under clause 5 (e) to schedule 11 of CGST as a declared service and GST is applicable on supply of taxable services u/s 7 (1) of CGST Act 2017. In this case GST is applicable @ 18% under the entry of "Services Not Elsewhere Classified" on amount of recovery of notice pay from employee. Notice pay recovery should be subjected to GST ACT of 'Non Compliance' of employment contract wherein employer is receiving consideration from employee for toleration of Act. Such a toleration of Act is defined as 'Supply of Service' in schedule 11 of CGST Act 2017. 3.2.3 REFERENCE: 1) AMNEAL PHARMACEUTICALS PVT LTD (AAR GUJRAT) 2) CALTECH POLYMERS PVT LTD (KERALA AAR) 04. HEARING 4.1 Preliminary hearing was held via virtual mode on 13.07.2021. Authorized representatives of the Applicant, Shri. Sandeep Sachdeva, Advoc....
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....nts Health Insurance expenses from employee does not amount to supply of service under the GST Laws. Since there is no supply of services there is no question of time and value of the supply. The applicant cannot claim ITC of GST charged by the insurance company. Even in the case of M/s POSCO India Pune Processing Centre Private Limited, they were recovering only 50 % premium from their employees and in the subject case entire 100% is recovered from the employees of premium paid by the applicant to the Insurance Company. 5.2.3 Since the facts, in the case of M/s Jotun India Private Limited and also in the case of M/s POSCO India Pune Processing Centre Private Limited are similar to the facts of the present case with respect to recovery of premiums from the employees, paid by the applicant on Parental Insurance Policy, there is no reason or us to deviate from the decisions taken in both the said cases and therefore we hold that, in the instant case, GST would not be payable on recoveries made from the employees towards providing parental insurance. 5.3 Question No. 2: Whether the GST would be payable on the notice pay recoveries made from the employees on account of not serving th....
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....iable 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 2020-VIL-39-MAD-ST. 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 ....
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....n the course or furtherance of business; (b) import of services for a consideration whether or not in the course or furtherance of business; and (c) the activities specified in Schedule I, made or agreed to be made without a consideration; (d) Omitted vide Notification No. 02/2019-CT dated 29.01.19 1(A) where certain activities or transactions constitute a supply in accordance with the provisions of sub-section (1), they shall be treated either as supply of goods or supply of services as referred to in Schedule II." (amended retrospective effect from 1.7.2017) 2. Notwithstanding anything contained in sub-section (1),- (a) activities or transactions specified in Schedule III; or (b) such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council, shall be treated neither as a supply of goods nor a supply of services. 3. xxxxxxx SCHEDULE III of Section 7 - Activities or transactions which shall be treated as neither supply of goods nor supply of services. 1. Services by an employee to the emplo....
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.... an act or situation where one of the parties is under obligation, as agreed upon, to forbear, refrain or tolerate an act or situation, against consideration. Section 2(31)(b) of CGST Act 2017 defines consideration in relation to supply of goods and services or both and includes the monetary value of any act or forbearance. The word "Service" defined under Section 2(102) of the CGST Act, 2017 means anything other than goods, money and securities. It is pertinent to understand before levy; (i) whether the receipt or deduction of salary in lieu of notice period by an employee can be said to be consideration for an act of forbearance and (ii) whether the act of accepting the resignation without contractual period of notice from an employee can be said to be an act of toleration. The employee opting to resign by paying amount equivalent to month of salary in lieu of notice, has acted in accordance with the contract and that being the case no question of any forbearance or tolerance does arise. Further, as per the agreement, the resignation by the employee is not subject to any acceptance or approval and employee is free to tender his resignation, make payment of notice period sal....