AI Drafter 
TaxTMI 
TaxTMI 
2023 (7) TMI 525
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....ing the tax liability or reducing the amount of admissible input tax credit shall be made, unless the appellant has been given an opportunity of being heard. 2. Under Section 103(1) of the Act, this Advance ruling pronounced by the Appellate Authority under Chapter XVII of the Act shall be binding only (a) on the applicant who had sought it in respect of any matter referred to in sub-section (2) of Section 97 for advance ruling; (b) on the concerned officer or the jurisdictional officer in respect of the applicant. 3. Under Section 103 (2) of the Act, this advance ruling shall be binding unless the law. facts or circumstances supporting the said advance ruling have changed. 4. Under Section 104(1) of the Act, where the Appellate Authority finds that advance ruling pronounced by it under sub-section (1) of Section 101 has been obtained by the appellant by fraud or suppression of material facts or misrepresentation of facts, it may, by order, declare such ruling to be void ab-initio and thereupon all the provisions of this Act or the rules made thereunder shall apply to the appellant as if such advance ruling has never been made. At the outset, we would ....
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....supply of food by the applicant is "Supply of service by the applicant to their employees as the same is not a part of the employment contract and the canteen facility is provided as mandated under factories Act. the nominal cost, which is recovered from the salary as deferred payment is 'consideration' for the supply and GST is liable to be paid." 4. Aggrieved of the decision of AAR in the Order No: 20/AAR/2022 dt. 31.05.2022. M/s Kothari Sugars and Chemicals Limited preferred the subject appeal, the grounds of appeal, inter alia were as follows: • that perquisites forming part of employment contract were excluded from GST as per Circular No. 172/04/2022-GST; the employment appointment order shows the starting basic pay and it is also stated that "they will be eligible for only those benefits as applicable to others of the cadre"; • that under Section 17(2) of the Income Tax Act, 1961 provides an inclusive definition for the term "perquisites' wherein sub-clause (viii) provides that the value of any other fringe benefit or amenity may be prescribed; • that recovery of canteen cost from employees was a mere cost sharing arrangement between ....
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..../employer; and the other invoice to the extent of the balance amount which was borne by the company/employer. 5.2 Further, in response to the query whether the amount paid by the employees, although at subsidized rates, was/is being received by the vendor caterer or the employer, the AR submitted that it is received by the company/employer; but it is ultimately paid to the vendor caterer against the relevant invoice, received from the supplier of the service. 5.3 It was submitted that there is only a single service transaction in the said ease and the aspect of recovery from employees is merely a passthrough activity and not a separate transaction, Hence the levy under GST should be applicable only on the element of service provided by the vendor caterer to the company. 5.4 In response to the query as to how the charges collected from the employees by the company towards canteen facility/food & beverages provided to the employees, would form part of salary/remuneration of the employees, the AR drew attention to various ease laws and the rulings of AAR/AAAR of other states, cited in the additional submissions; and requested to adopt the ratio of the same; and decide the mat....
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....part of the amount collected from their employees towards provision of food. It is pertinent to note that the subject matter is not with regard to that part of the cost of food/beverages borne by the employer (Appellant). The subject Appeal is only with regard to the levy of GST on the subsidized amount charged by Appellant/employer from their employees for the supply of food/beverages. 7.1 Thus, fundamentally, the subject issue pertains to the transaction between the Appellant/ employer and employees, i.e., with respect to the food/beverages being supplied by Appellant/ employer to employees for a consideration, although at subsidized rates: but not with regard to the transaction between the caterer (third party vendor/service supplier) and the Appellant/employer. This aspect is also evidenced by the fact that the employer pays the total consideration for the supply of food/beverages to the caterer/service supplier; and the Appellant/employer in turn supplies the above said food/beverages to their employees. 7.2 It is an undisputed fact that the money consideration charged, although at subsidized prices, for the supplying of food/beverages from their employees is being colle....
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....into between the employer and the employee are in lieu of the services provided by employee to the employer in relation to his employment. It follows therefrom that perquisites provided by the employer to the employee in terms of contractual agreement entered into between the employer and the employee, will not be subjected to GST when the same are provided in terms of the contract between the employer and employee. 7.8 As per the contents of the employment appointment orders issued to their employees, it is evident that, inter alia, there exists a clause stating that '"employees will be eligible for only Those benefits as applicable to others of the same cadre'. This is more of a generic clause featured in the appointment orders of most companies and by no stretch of imagination such expression among the terms of the employment can be construed to mean that the subsidized supply of the food/beverages was a contractual agreement entered into between the Appellant and their employees in both the factories. 7.9 In order to claim the benefit of non-levy of GST in terms of the above circular, the relevant Perquisites should have been expressly mentioned in the terms of agreement ....
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.... not to be taken into account in fixing the cost of foodstuffs and which shall be borne by the employer; (e) the delegation to the Chief Inspector, subject to such conditions as may be prescribed, of the power to make rules under clause (c)." 7.12 From the above-mentioned Section 46 of Factories Act, 1948 although mandates to provide a canteen for use of workers in a factory, wherein more than two hundred and fifty workers were ordinarily employed, it does not provide for any provision for exemption from levy of any taxes. In fact, Tax in this case is leviable in terms of the provisions of the GST law, on the consideration (on the actuals, at subsidized rates) for supply of the food/beverages; and is not covered by any exemption, at all. Further, the said consideration for supply of food/beverages, although at the subsidized rates, is also do not qualify as the perquisite to extend the benefit of non-levy of GST in terms of the above cited Circular dated: 06.07.2022, as already narrated above. The appellant relied on the advance ruling given in the case of HAZIRA TNG PVT LTD [FINAL ORDER No. A/11349/2022 DATED 02.11.2022], wherein it has been ruled that there would be n....
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....eceived certain services in common and the cost of services was shared by them: and the Apex court held that the amount paid by GACL to GSFCL towards their share of expenditure for the common services was only for reimbursement of the expenditure and there was no service received by GACL; hence service tax was not leviable. But, in the instant case the levy is with regard to the consideration received by the Appellant/employer from their employees towards the supply of the food/beverages. Thus, the facts of the said judgement in the case of GSFCL are totally different; and hence the ratio of the said case cannot be applied to this case. 7.14 further, the Appellant had contended that the provision of canteen facility was not covered by the scope of supply. AAR had deliberated on this issue and had decided that supply of food is service. Also, the Appellant admits that no invoice was being raised by the caterer/third party service provider on individual employees towards the supply of food/beverage. As admitted by the Appellant, the third-party catering vendor, maintaining the canteen has been issuing two consolidated invoices to the Appellant every month, for the supply of food/B....