TaxTMI 
TaxTMI 
TaxTMI 
2024 (1) TMI 170
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...., SP-1/892,893, Industrial Area Pathredi, Near Chopanki, Bhiwadi, Alwar, Rajasthan - 301707 (hereinafter referred to as "applicant"). Applicant has entered a contract with a third-party canteen service provider for providing cooked food, drinks etc., to employees, in canteen area which is inside the factory of Applicant., in the name of M/s Shriram Pistons & Rings Limited. The Three Issues raised by applicant is fit to pronounce advance ruling & it falls under the ambit of the Section 97(2) (d),(e)& (g) given as under: (d) admissibility of input tax credit of tax paid or deemed to have been paid; (e) determination of the liability to pay tax on any goods or services or both (g) whether anything done by the applicant with respect to any goods and/or services or both amounts to or results in a supply of goods and/or services or both, within the meaning of that term. A Submission of The Applicant: (in brief) Applicant has entered a contract with a third-party canteen service provider for providing cooked food, drinks etc., to employees, in canteen area which is Inside the factory of Applicant. The canteen service provider is raising its invoices on Applicant and Applicant is m....
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....ine and to avoid wastage of food, Applicant recovers a part (at subsidized rates) of the meal cost incurred by it from employees. Accordingly, the charges of the meals/snacks are deducted from the salary of the individual employee. Copy of relevant documents are enclosed as Annexure-C. 7. The said amount recovered from employees is paid to canteen contractor along with the remaining portion, which is paid by Applicant. It is pertinent to note here that Applicant does not retain any part of such amount and moreover, no profit is made by Applicant from such activity. 8. Under the aforesaid circumstances, Applicant is filing the present application seeking advance ruling to understand whether GST is payable on the amount recovered by Applicant from its employees for providing food in canteen. Also, whether Applicant is eligible to take Input Tax Credit ("ITC") of GST charged by canteen contractor for canteen service availed by it for its employees. APPLICANT'S ELIGIBILITY FOR ADVANCE RULING: 1. Section 97(2) of the Central Goods and Services Tax Act, 2017 ("CGST Act") and Rajasthan Goods and Services Tax Act, 2017 ("RGST Act"), entails that an advance ruling may be filed by Applic....
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....ill not be subjected to GST. Further, such deductions are not in nature of consideration for any supply. 7. Further, Applicant is eligible to take ITC of GST charged by canteen contractor for canteen service received by it for Its employees as same is received in course or furtherance of Its business of manufacture in terms of Section 16(1) of the CGST Act. 8. The submissions in support of the aforesaid interpretation have been enunciated in the following paragraphs: A. The food facility provided by Applicant to employees is excluded from the scope of 'supply in terms of Clause (a) of Section 7(2) of the CGST Act. 9. It is submitted that the food facility provided by Applicant to its employees, is excluded from the purview of 'supply in terms of clause (a) to Section 7 (2) of the CGST Act. The relevant provisions are reproduced below: "SECTION 7. Scope of supply. - (1) For the purposes of this Act, the expression "supply" includes- (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; ...............
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....14. In the instant case, Applicant has made available food facility to its employees in the course or in relation to their employment whereby they can take a meal in the factory canteen. Further, as already stated above, the food facility is being provided in the factory of Applicant due to the mandatory requirement of Section 46 of the Factories Act read with Rule 69 of Rajasthan Factories Rules. 15. It is further submitted that the food facility is similar to the other facilities like providing workspace, air-conditioning, laptops, computers and photocopy machines etc., made available by employer, facilitating employees to contribute towards the business activities of employer. 16. These facilities are not for personal benefit of employees. Therefore, the food facility cannot be said to be an independent supply provided/made by employer to employees. Rather, it is statutory requirement of the Factories Act read with Rajasthan Factories Rules. 17. It is further submitted that the nominal amount recovered from employees is only towards recovery of part of the cost of food facility extended by Applicant. Bearing of part of cost by employees will not alter the nature of transactio....
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....elation to his employment" will as supply of goods or services hence GST is not applicable employer provided they are employment. 2. Any perquisites provided by employer to its employees in terms contractual agreement entered between the employer and the employee lieu of the services provided employee to the employer in relation his employment. It follows there that perquisites provided by employer to the employee in terms contractual agreement entered between the employer and employee, will not be subjected to GST when the same are provided in terms the contract between the employer employee. (Emphasis Supplied] 20. In view of the above, it is submitted that the food facility provided by Applicant to Its employees would not amount to 'supply' under GST. Accordingly, GST is not payable on the amount recovered from employees' portion of canteen charges, which is collected by Applicant and paid to canteen contractor. 21. It is submitted that the subject activity or transaction, if any, is undertaken in the course of employment or in connection with employment and does not amount to supply of goods or services by virtue of Section 7(2) read with Entry 1 of Schedule III. Also, as ....
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....ly vis-à-vis applicant. c. In Re: North Shore Technologies Private Limited, 2021 (49) G.S.T.L. 315 (A.A.R. - GST - U.P.), wherein it was held that the subsidized amount collected from employees for usage of transportation facility is paid to the third-party vendor, without retaining such collected amount towards provision of such transportation facility. Therefore, the arrangement of transportation for employees and recovery from employees towards such transport facility, under the terms of the employment contract, cannot be considered as supply of service in the course of furtherance of business. d. Dakshina Kannada Co-Op. Milk Producers Union Ltd., 2021 (55) G.S.T.L. 574 (A.A.R. - GST - Kar.), wherein applicant was providing lunch and refreshments to Its employees by engaging a canteen contractor. The bill for the supply of food to employees was paid by applicant and applicant was also collecting a specified amount from employees which was less than the amount paid to canteen contractor. In the aforesaid factual matrix, applicant sought ruling on the question as to whether provision of subsidized lunch and refreshments to employees through contractors Is to be treated ....
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.... providing any supply and, accordingly no GST is payable on the part amount recovered from the salary of employees. Without prejudice, the subsidized deduction made by Applicant from the salary of employees, who are availing food facility in the factory, does not constitute 'supply per se in terms of Section 7 read with Schedule I of the CGST Act, as it Is not in furtherance of business of Applicant. 33. It is submitted that the subsidized amount recovered from employees, by Applicant, for providing food facility is not covered within the ambit of "supply" under clause (a) of Section 7(1) of the CGST Act. 34. In order to analyses the present issue, reference is made to Section 7(1) of the CGST Act, which defines the term 'supply as under: "7. (1) For the purposes of this Act, the expression "supply" Includes- (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; (b) import of services for a consideration whether or not in the course or furtherance of business; (c) the activities specified in Schedul....
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....provides that the term "business" includes any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity whether or not it is for pecuniary benefits. Also, as per clause (b) any activity ancillary or incidental to the activities covered under clause (a) are also treated as business. 38. Further, clause (c) also states that any activity or transaction falling in the above categories would be business whether or not there is volume, frequency, continuity or regularity in transactions. Hence, the above definition provides that business includes any activity in the nature of trade, commerce, manufacture, etc. 39. It is reiterated that 'supply' can come Into existence only when there is any activity done in the course of business or furtherance of business. It Is clear from the above discussion that business means any activity in the nature of trade, commerce, manufacture, etc. 40. Further, Section 7(1)(c) of the CGST Act provides that the scope of supply includes activities specified in Schedule I, made or agreed to be made without consideration. 41. Entry 2 to Schedule I of the CGST Act provides that supply of goods or services or both, bet....
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....ervices. It is only the statutory requirement due to which Applicant is providing the food facility to its employees. Hence, canteen facility cannot be said to be a business activity of Applicant and the provision of canteen facility to employees cannot qualify as, supply. 50. It is also submitted that the business of manufacturing, cooking, packing, supplying food items Is strictly regulated under the Food Safety and Standard Act, 2006 ("FSSAI Act"). Canteen contractor may be complying with the conditions of FSSAI Act. However, Applicant is receiving canteen facilities for its employees. Therefore, Applicant does not hold a license to carry out food related business. 51. It is submitted that, had Applicant been engaged In the business of canteen services, Applicant would have been required to obtain the requisite registration and undertake necessary compliance under the FSSAI regulations. The relevant provisions under FSSAI Act are extracted below: "Section 3 (1) (n) "Food business" means any undertaking, whether for profit or not and whether public or private, carrying out any of the activities related to any stage of manufacture, processing, packaging, storage, transportatio....
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....ced on the general principles of interpretation for understanding the same. Based on the plain reading of the expression, it is generally construed that activities undertaken by a person in connection with or having a proximate and close nexus to its business is in the course or furtherance of business. 58. It Is also submitted that as per clause (b) of Section 2(17) of the CGST Act, business also includes any activity which is In connection with or incidental or ancillary to the activities covered under clause (a) of Section 2 (17) of the CGST Act. Hence, one may question as to whether the provision of canteen facility can be said to be in connection with or incidental or ancillary to the principal business of automotive components. 59. In this regard, it is submitted that the connected activities or incidental or ancillary activities cannot be construed to include all activities carried out by the business. Furthermore, as per Black's Law Dictionary (Ninth Edition), "incidental" means dependent upon, subordinate to, arising out of, or otherwise connected with (something else, usually of greater importance). Also, the term "ancillary" Is defined in the Black's Law Dictionary (Ni....
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....vity made in the course or furtherance of business to deem it a Supply by M/s Shriram Pistons and Rings Limited to its employees in view of the above clarification and therefore amount collected by M/s Shriram Pistons and Rings Limited from employees towards canteen charges in terms of the contractual agreement in lieu of providing canteen service i.e. food is not liable to GST. We, therefore observe that the applicant is not liable to pay GST on the amount deducted/recovered from the employees. Further the applicant is recipient of canteen service to facilitate the employees and Canteen Service Provider rakes the Bill of canteen charges inclusive of GST as per the contract. The applicant collects/ recovers the partial amount from the employees and is required to pay the gross amount Inclusive of GST to the canteen service by adding residual amount in the employees' portion and Is required to pay gross amount of Bill inclusive of GST to the Canteen Service Provider? [Emphasis Supplied] Copy of the above ruling is enclosed herewith as Annexure-D. 65. It is further submitted that Entry 2 to Schedule I of the CGST Act, referring to supply of goods or services or both between rel....
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....ction 17(5)(b) of the CGST Act. which merits discussion in light of the facts of the instant case, is extracted hereunder for ease of reference: "(5) Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (1) of section 18, input tax credit shall not be available in respect of the following, namely :- (b) the following supply of goods or services or both - (I) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) except when used for the purposes specified therein, life insurance and health insurance : Provided that the input tax credit in respect of such goods or services or both shall be available where an inward supply of such goods or services or both is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply; (ii) membership of a club, health and fitness centre; and (iii) travel benefits extended to employees on vacation such as leave or home travel concession: Provid....
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....; (dd) the items of expenditure In the running of the canteen which are 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)." [Emphasis Supplied) 77. In exercise of the powers conferred tinder the Factories Act, the State Government of Rajasthan framed the Rajasthan Factories Rules, which also mandated maintenance of canteen in the factory under Rule 69 ibid. The relevant provision Is reproduced below: "69. Canteens. - [(1) x x x] (2) The occupier of every factory notified by the State Government, and wherein more than two hundred and fifty workers are ordinarily employed shall provide in or near the factory an adequate canteen according to the standards prescribed in these rules." [Emphasis Supplied] 78. In view of the above provisions, it is abundantly clear that Applicant is maintaining its canteen under a statutory mandate provided in Section 46 of the Factories Act read with Rule 69 of the Rajasthan Factories Rules. Therefore, Applicant is eligible to am, ITC of the GST p....
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....o fulfill its obligation under the Factories Act and Rajasthan Factories Rules. Accordingly, Applicant is eligible to avail ITC of GST paid against the invoice raised by canteen contractor and such credit is not subject to the rigor of Section 17(5)(b)(i) of the CGST Act. 81. As a settled law, circulars issued by the CBIC are binding on the department. In this regard, reliance is placed on judgment of Hon'ble Supreme Court in Commissioner of C. Ex., Bolpur vs. Ratan Melting & Wire Industries, 2008 (231) E.L.T. 22 (S.C.). 82. Similar view has been taken by Hon'ble UPAAR in Applicant's own case (Advance Ruling No. UP ADRG -16/2022 dated 5.12.2022). 83. Thus, Applicant is eligible to take ITC of the GST paid on the invoices raised by canteen contractor in terms of Section 16(1) of the CGST. The GST has been paid in furtherance to the business as well as is not subject to the rigor of Section 17(5)03) as such facility was provided under a statutory obligation. 84. In view of the above, et is summitted that canteen facility provided by Applicant to Its employees would not amount to 'supply' under GST. Accordingly, GST Is not payable on the amount recovered from employees' portion of....
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....uction made from the salary of employees, who are availing facility of food in the factory, can be considered as consideration for 'supply of service' by Applicant to Its employees, in furtherance of business, as per Section 7 read with Schedule I of the Central Goods and Services Tax Act, 2017 and Rajasthan Goods and Services Tax Act, 2017? (iii) In case answer to (b) is yes, whether GST Is applicable on the amount deducted from the salaries of employees? (iv) Whether Applicant is eligible to take input tax credit on the GST charged by third party contractor for canteen services availed by it for its employees? D. PERSONAL HEARING In the matter personal hearing was granted to the applicant on 26.06.2023. Adv. Shri Narendra Singhvi, Sr. Executive Umesh Chandra Rawat, Authorized Representatives appeared for personal hearing. They reiterated the submission already made in written submission. They relied on various ruling in their favour and particularly ruling in their own case in Uttar Pradesh dated 05.12.2022. They submitted a compilation of relevant legal provisions, circulars, and ruling/judgement. E. COMMENTS OF THE JURISDICTIONAL OFFICER The Jurisdictional Deputy Commissi....
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....od and Service Tax Act, 2017. Section 17. Apportionment of credit and blocked credit-(5) Not withstanding anything contained in Sub-section (1) of section 18, input tax credit shall not be available In respect of the following, namely:- (b) [the (Wowing supply of goods or services or both- (I) food and beverage, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting, or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause(aa) except when used for the purposes specified therein, cite insurance and health insurance. F. FINDINGS, ANALYSIS & CONCLUSION: At the outset we would like to make it clear that the provisions of CGST Act and RGST Act are in pari materia and have the same provisions in like matter and differ from each other only on a few specific provisions. Therefore, unless a mention is particularly made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the RGST Act. 1) We have carefully examined the statement of facts, supporting documents filed by the Applicant We have perused the records on file and gone through the....
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....o ensure administrative control, discipline and to avoid wastage of food, Applicant recovers a part (at subsidized rates) of the meal cost incurred by it from employees. Accordingly, the charges of the meals/snacks are deducted from the salary of the individual employee. The said amount recovered from employees Is paid to canteen contractor along with the remaining portion, which is paid by Applicant. It Is pertinent to note here that Applicant does not retain any part of such amount and moreover, no profit is made by Applicant from such activity. We find that the applicant is involve in providing/ supplying Canteen Services to its employees as well as contract workers. The Applicant has contracted with Third party (hereinafter referred to as 'the Canteen Service Provider') to operate Canteen within the Applicant's factory premises; and a part of the cost of the meals provided is deducted by the Applicant from their employees' salaries on a monthly basis. 5. Based on the written submission made by the applicant and documents submitted by applicant, we find that applicant have agreements from various firms for supply of man power which is his inward supply and not the question of ....
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....for a proposed transaction & matters related to qualifies for advance ruling whether it will be undertaken or proposed to be undertaken. We also observe that advance ruling under GST can be obtained for a proposed transaction as well as a transaction already undertaken ay the appellant but the transactions on which GST is being paid since long are out of preview of advance ruling. 11. Moreover, on gone through the facts of the case, we observe that applicant filed their application before the Rajasthan Authority for Advance Ruling (RAAR) on 21.03.2023 i.e. much later from the execution of contract on canteen service supplied by him if supplied. We observe that applicant motto is to find out whether the mechanism opted by him for payment of GST on said service is right or wrong, whereas applicant already paying the GST In the matter. which is against the spirit of advance ruling. 12. Since the Applicant has asked for ruling on the transactions effected prior to the date of filing of the application before the RAAR, we find It appropriate to visit the definition of the 'Advance Ruling' given under Section 95(a) of the CGST Act, 2017 which is reproduced as under: - "95. Definition....