TaxTMI 
TaxTMI 
2022 (6) TMI 1255
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....hi Road, Nungambakkam, Chennai, Tamil Nadu, 600 034 (hereinafter called the 'Applicant') is registered under the GST Vide GSTIN 33AABCK2495F1ZP. They have sought Advance Ruling on the following question: Whether recovery of nominal amount from the employees for making payment to the third-party service provider, providing food in canteen as mandated in the Factories Act, 1948 would attract tax under GST?' The Applicant has submitted the copy of application in Form GST ARA - 01 and also submitted a copy of Challan evidencing payment of application fees of Rs.5,000/- each under sub-rule (1) of Rule 104 of CGST rules 2017 and SGST Rules 2017. 2.1 The applicant has stated to be engaged in the manufacture of sugar, molasses, Denatured ethyl alcohol, and ethyl alcohol. They have stated that they have two manufacturing units located at Kattur and Sathamangalam, wherein around 300 workers have been employed. Section 46 of the Factories Act, 1948, prescribes for the operation and maintenance of canteen for the use of the workers, where more than two hundred and fifty workers are ordinarily employed. Accordingly, they had set up canteen facility at both the units, for the bene....
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....ty to their employees working in the factory. 2.3 For any transaction to be taxed under GST, the same should fall within the scope of supply as envisaged in Section 7 of the CGST Act, 2017. As per Section 7(1) of the CGST Act, 2017 any transaction to be covered within the scope of supply should satisfy the following conditions- There should be supply of goods or services or both; There should be consideration; It should be in the course or furtherance of business. In the instant case, there is no aspect of supply between them and the employee in respect of canteen services. They have engaged a third-party vendor for the provision of canteen services and the canteen service is actually provided by the third-party vendor. They merely facilitate the provision of such service by the third-party vendor for the use of the employees. Therefore, there is no scope for supply of services between them and their employees in the instant case. Further, they are engaged in the business of manufacture of sugar, molasses, Denatured ethyl alcohol, and ethyl alcohol and not in the provision of canteen facility. Section 2(17)(b) of the CGST Act, 2017 pertains to any activity which has direct corre....
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.... pays the same to the third-party vendor who actually provides the canteen services. Thus, the amount received by the Applicant is merely in the nature of recovery and does not amount to consideration. They have placed reliance in the case of • TATA MOTORS LIMITED [2020 (41) G.S.T.L. 35 (A.A.R. - GST - MAH.)] • BHIMAS HOTELS PVT. LTD. [2017 (3) G.S.T.L. 30 (A.P.)] 2.5 The Applicant has further stated that they recover nominal amount on monthly basis to ensure use of canteen facility only by authorized persons/employees. Once employee ceases to be in employment with Applicant, he/she is not authorized to use the canteen facility. In other words, employer-employee relationship is must to avail this facility. The remaining portion of the expenditure incurred towards canteen facility is borne by Applicant as part and parcel of cost to company. In this regard, they place reliance in the Press Release issued dated 10.07.2017 wherein the CBIC has clarified that, supplies by employer to employee in terms of contractual agreement of employment (part of salary/CTC) is not subject to GST. The same would hold true for free housing to the employees, when the same is....
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....sample); and Salary slip. 3.2 In the additional submissions dated 15.03.2022, the applicant referred to the following decisions of various Advance Ruling Authorities who have held that GST would not be applicable on the nominal amount recovered from employees against the canteen services provided: a) BHARAT OMAN REFINERIES LTD. [2021-TIOL-36-AAAR-GST] b) DAKSHINA KANNADA CO-OP. MILK PRODUCERS' UNION LIMITED [2021 (55) G.S.T.L. 574 (A.A.R.- GST-KAR.] c) EMCURE PHARMACEUTICALS LTD. [2022-TIOL-10-AAR-GST] d) AMNEAL PHARMACEUTICALS PVT. LTD [TS-569-AAAR(GUJ)-2021-GST] 3.3 In furtherance to the hearing held on 16.03.2022, the applicant furnished the sample copies of employment contract and salary slip and the following additional submissions vide their letter dated 21.03.2022: • The tokens are issued only for visitors in the factory. In respect of employees, the consumption of food is tracked vide ledger entries (each page of the ledger is allocated for each of the employees) which is also annexed along with the Salary slip of the employee for the purpose of computation of amount to be recovered. • The costing adopted f....
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....ees per unit of consumption, the same is as under: • The details of number of employees employed during crushing season and off season in each of the unit are as follows: Particulars Cost recovered from Kattur unit employees Rs. IDLY 0.60 PONGAL 0.60 POORI 0.60 TEA 1.00 VADAI 0.60 MEALS 7.50 SNACKS 1.00 VARIETY RICE 0.6. PAROTA 1.70 Kattur Unit : Number of workers - 147 workers. Number of Contract Labours - 296 labourers. During offseason the approximate strength of employees and Contract workers would be 125 and 150 respectively. Sathamangalam Unit : Number of workers - 166 Workers. Number of Contract Labours - 235 labourers. During offseason the approximate strength of employees and Contract workers/ labourers would be 100 and 60 respectively. • Canteen services is operating throughout the year in Kattur and Sathamangalam units. 4. The State Jurisdictional authority who has the administrative jurisdiction over the applicant vide his letter RC.82/2022 dated 28.02.2022, has stated that the applicant has arranged a canteen for the employees, which is run by the third p....
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....ing question: Whether recovery of nominal amount from the employees for making payment to the third-party service provider, providing food in canteen as mandated in the Factories Act, 1948 would attract tax under GST? The question is in respect of whether they are liable to pay tax on recovery of amount from the employees for making payment to the third-party service provider, providing food in canteen at their manufacturing units. The question is admissible as the same is covered under Section 97(2)(e) of the Act read with Section 95 of the Act. 7.1 It is seen that the Applicant had set up a canteen facility at both the units, for the benefit of its employees and workers. The clarification sought is as to whether GST is liable to be paid on that part of the amount collected from their employees towards provision of food. The contention of the applicant is that • Since the supply of food in canteen is part of employment contract the same shall be ousted from the scope of supply vide the said entry Entry 1 in Schedule III of the CGST Act, 2017. • There is no supply between the Applicant and the employees and the Applicant is not engaged in th....
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....has agreed to provide canteen facilities in the canteen of the unit, for a fixed service charge and at mutually agreed prices for the various items as per the menu decided by the canteen committee of the applicant unit. Further the applicant extends a fixed number of commercial gas cylinders for use in the canteen. The vendor accordingly provides the food as per the menu to the persons partaking food at the canteen and raises two invoices one for the service charge & cost borne by the applicant unit and another for the recovery amount to be made as seen from the copies of the Tax Invoice raised on the applicant. From the deduction check list for the month of July 2021, it is seen that 111 employees had partaken food and the deductibles have been arrived at. On perusal of the appointment order issued to Mr. M. Sudhakar as Clerk(Seasonal) dated August 01, 2008 and that issued to Mr. D.Kumar as Welder(Seasonal) dated 01/01/2009, apart from mention of basic salary, conveyance, it is stated that they will not be eligible for any other allowances available to the other employees. From the pay slips enclosed for these employees it is seen that there are deductions on account of 'Canteen'.....
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.... respect of the food consumed by such employee. Therefore, the contention that the activity of supply of food for a nominal charge by them is neither a supply of goods nor a supply of service is not legally tenable. 8.2 The next contention of the applicant is that there is no supply between the Applicant and the employees and the Applicant is not engaged in the business of provision of canteen services but has established the canteen as required under the Factories Act. Factories Act 1948 on providing the facility of Canteen, states as follows: 46. Canteens. (1) The State Government may make rules requiring that in any specified factory wherein more than two hundred and fifty workers are ordinarily employed, a canteen or canteens shall he provided and maintained by the occupier for the use of the workers. (2) Without prejudice to the generality of the foregoing power, such rules may provide for- (a) the date by which such canteen shall be provided; (b) the standards in respect of construction, accommodation, furniture and other equipment of the canteen; (c) the foodstuffs to be served therein and the charges which may be made therefor....
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.... 'Outward Supply' in relation to a taxable person, means supply of goods or services or both, whether by sale, transfer, barter, exchange, license, rental, lease or disposal or any other mode, made or agreed to be made by such person in the course or furtherance of business". Thus supply made by a taxable person in the course or furtherance of business is an 'Outward supply'. It has been brought out above, that establishing canteen is in the furtherance of business of the applicant and supply of food to the employees when the same is not contractually agreed, is not an allowance as a part of the employment. Thus, the provision of food in the canteen for a nominal cost is a 'Supply' for the purposes of GST. Schedule II to the CGST Act, 2017 describes the activities to be treated as supply of goods or supply of services. As per clause 6 of the Schedule, the following composite supply is declared as supply of service: "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, de....