TaxTMI 
TaxTMI 
2022 (11) TMI 1265
X X X X Extracts X X X X
X X X X Extracts X X X X
....-247663 (herein after referred to as the "applicant") and registered with GSTIN 05AADCT1398N1ZW under the CGST Act, 2017 read with the provisions of the UKGST Act, 2017. 2. In the application dated 26.08.2022, the applicant submitted that:- (a) That they are a leading engineering company engaged in manufacture of precision steel tubes and strips, automotive, industrial chains, car door frame and bicycles. And they have a factory in the state of Uttarakhand where in more than 500 workmen (both direct and indirect) are employed. (b) They have entered into agreement with the contractors to operate canteen within the factory premises to provide food to their employees. (c) They recover nominal amount from the employees on monthly basis and such recoveries are shown as a deduction in the monthly slip of the employees. (d) They do not avail input tax credit (ITC) on the expenses incurred on the services provided by the canteen service provider and are absorbing the GST charged by the canteen service provider as a cost in the books of accounts. (e) They discharge GST @5% on the cost of the canteen service provider total taxable value plus 10% notional mark up. In view of the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....services or both within the meaning of that term. 5.2 In the present case applicant has sought advance ruling on the determination of the liability to pay tax on services, therefore, in terms of said Section 97(2) ( c), (d), (e) & (g) of CGST/SGST Act, 2017, the present application is hereby admitted. 5.3 Accordingly opportunity of personal hearing was granted to the applicant on 13.10.2022. Sh. K Sivarajan, Chartered Accountant and Sh. K Karthikeyan, Company Representative, on behalf of the applicant appeared for personal hearing on the said date and re-iterated the submission already made in their application. Sh. Deepak Brijwal, Deputy Commissioner, Concerned Officer from the State Authority was also present during the hearing proceedings. He presented the facts and requested the authority to decide the case on merits. 6. From the record submitted by the applicant we find that applicant is registered in Uttarakhand with GSTIN bearing No. 05AADCT1398N1ZW. Before proceeding in the present case, we have to first go through the submissions made by the applicant which are as under:- i. That they are a company incorporated under Companies Act, 1956 manufacturing precision steel t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is a leading engineering company engaged in manufacture of precision steel tubes and strips, automotive, industrial chains, car door frame and bicycles and wherein in a factory in the state of Uttarakhand more than 500 workmen (both direct and indirect) are employed. The applicant recover nominal amount from the employees on monthly basis to provide food to them and for same they have engaged contractors, who operates canteen within the factory premises. The applicant discharge GST @5% on the taxable value which is sum total of the cost of the canteen service provider plus 10% notional mark up. It has also been submitted by the applicant that they do not avail input tax credit (ITC) on the expenses incurred on the services provided by the canteen service provider and are absorbing the GST charged by the canteen service provider as a cost in the books of accounts. It is seen that the Applicant had set up a canteen facility, 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 and also that whether ITC is available on the GST paid by them o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t case, firstly it is not mandatorily compulsory to consume the food and secondly the Canteen facility is provided by the applicant in their factory in accordance with the mandate under the Factories Act, 1948; but in lieu of such facility, collects an amount though nominal, fixed as employee cost, 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. 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. The Factories Act, 1948 on providing the facility of Canteen, states as under:- "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 be 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ether 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, deferred payment or other valuable consideration." Therefore, the supply of food is a 'Sup....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in hand the applicant has claimed that they are adding 10% mark up cost on the cost of service provider for payment, but they have not provided the components of such "mark up cost" or what are the constituents, even though they are silent on the issue of cost of the area and the infrastructure, which admittedly includes tables, chairs, utensils, washrooms, wash basins, storage rooms for keeping the cooked food, washing the utensils provided by them to the canteen service providers i.e. contractors. We also find that the electricity and other equipment for running the canteen is also supplied by the applicant, but the cost incurred or capitalized in the books of accounts have not been charged from the contractors for using and utilizing the infrastructure of the applicant as discussed supra, which ought to have been the cost for the contractors to be included in the taxable value. To sum up, in the case at hand, the applicant has established canteen facilities as mandated under Factories Act, 1948 and supplies food at a nominal cost through third-party-vendor. The supply of food by the applicant is 'Supply of Service' by the applicant to their employees as the same is not ....