TaxTMI 
TaxTMI 
2024 (1) TMI 953
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...., Goods & Service Tax, Uttarakhand passed in an application under Sub-Section (1) of Section 97 of the Central Goods 86 Service Tax Act, 2017 and Uttarakhand State Goods & Service Tax Act, 2017 (hereinafter referred to as CGST/SGST Act) and the rules made there under filed by M/s Tube Investment of India Limited, 230 8& 231, Gangnouli, Laksar, Haridwar, Uttarakhand-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 sl....
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....ide the same to its employees as mandated under the Factories Act, 1948, even if the answer to question (a) is "No"? - Benefit of ITC is not admissible on the GST on the amount paid to the canteen service providers and also on the amount recovered from the employees. d. Whether input tax credit (ITC) can be availed on GST charged by the Canteen service providers, the answer to the question (b) is "Yes"? - No, ITC is not admissible on the GST on the amount paid to the canteen service providers." Not satisfied with the ruling of the Advance Ruling, Goods & Service Tax, Uttarakhand, the applicant filed an appeal with the Appellate Authority for Advance Ruling, Goods 8s Service Tax, Uttarakhand, under section 100 of the CGST Act, 2017 and UKGST Act, 2017 and while deciding the said appeal, the Appellate Authority for Advance Ruling, Goods & Service Tax, Uttarakhand vide Order No. 05/2022-23 dated 13.03.2023, at Para 10.4 and 11 made following observations:- "10.4. However, as is evident from the case records available before us, we find there was a recent CBIC Circular No. 172/04/2022-GST dated 06.07.2022 upon which the applicant had relied heavily upon at the time....
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....o the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant. 5. As per the said sub-section (2) of Section 97 of the Act advance ruling can be sought by an applicant in respect of:- (a) Classification of any goods or services or both (b) Applicability of a notification issued under the provisions of this Act, (c) Determination of time and value of supply of goods or services or both, (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 (f) Whether the applicant is required to be registered (g) Whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or 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 pers....
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....ct and pay in full to the service provider for the food served during a prescribed period on behalf of the employees and nominal amount is recovered from the employees on monthly basis and the balance amount is borne by the Applicant. 7. In the present case we are not deciding any wider question but restricting our conclusion to the facts and circumstances which were filed by the applicant for our consideration. We have considered the submissions made by the applicant in their application for advance ruling as well as the submissions made by applicant and his authorized representatives during the hearing. We have also considered the issue involved on which advance ruling is sought by the applicant, relevant facts and the applicant's interpretation of law. Now we proceed by taking up the issue: 8. We have carefully considered all the submissions made by the Applicant. The applicant 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 nomina....
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....Vide the Central Goods and Service Tax (Amendment Act) 2018, clause (b) of subsection (5) of section 17 of the CGST Act was substituted with effect from 01.02.2019. After the said substitution, the proviso after sub-clause (iii) of clause (b) of sub-section (5) of section 17 of the CGST Act provides as under: "Provided that the input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force." 2. The said amendment in sub-section (5) of section 17 of the CGST Act was made based on the recommendations of GST Council in its 28th meeting. The intent of the said amendment in subsection (5) of section 17, as recommended by the GST Council in its 28th meeting, was made known to the trade and industry through the Press Note on Recommendations made during the 28th meeting of the GST Council, dated 21.07.2018. It had been clarified "that scope of input tax credit is being widened, and it would now be made available in respect of Goods or services which are obligatory for an employer to provide to its employees, under any law for the time be....
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.... agreement lists out the compensation which is agreed to be granted by the employer to the employees for their services and if any perk/ privileges is mentioned in the employment contract, then it becomes binding for the employer to provide the same to the employees but anything provided beyond the employment contract, is a part of sweet will or largesse on the part of employer and cannot be insisted upon by an employee. In this regard, we observe that consuming food at the canteen facility made available by the applicant in their premises is not mandatory and it's purely optional at the end of the employees and that while extending the canteen facility, no meal is extended free but the meals/food are provided at concessional rates and specified amount in respect of the food consumed by the employee are collected by the applicant against such consumption of food, although the provision of food in canteen is on account of the mandate prescribed in the Factories Act, 1948. We observe that as per SI. No (1) of Schedule III of the CGST Act, 2017, only services by an employee to the employer in the course of or in relation to his employment are neither a supply of goods nor a sup....
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....nning 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)". The above said Act mandates establishing a canteen when more than two hundred and fifty workers are 'ordinarily' employed in a factory and as per sub- clause (2)(dd) above, certain expenditure are to be borne by the employer and hence the applicant established the canteen. We observe that the applicant is mandated to bear the cost on such facility. We observe that the term "business" is defined in Section 2(17) of the GST Act 201 7 as:- "business" includes: (a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit: (b) any activity or transaction in connection with or incidents or ancillary to sub-clause (a); We observe that establishing a canteen facility in the factory is an activity incidental to the running of their business. The Factory Act, above mandates establish....
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....ing of canteen are mandated on the part of the employer as per the Factories Act. Accordingly, such canteens are provided. It has been established that the supply of food in the canteens are 'Supply of Service' by the applicant. Consideration' is defined in Section 2(31) of the CGST Act 2017 as:- 'Consideration' in relation to the supply of goods or services or both includes,-a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government" We opine that the applicant supplies food to their employees at a nominal cost and recover such cost, which is a consideration for such supply made on which GST is liable to be paid. The recovery of cost from the salary as deferred payment does not alter the fact of the service provided and the person providing the said supply. The supply of food by the employer, i.e. the applicant to their employees is composite supply of food held as 'Supply of service' as per Schedule-I....
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.... (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 Provided that the input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force. " (emphasis supplied) The reading of the above provision makes it clear that prov....
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....ection 17 of the CGST Act provides as under: "Provided that the input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force." 2. The said amendment in sub-section (5) of section 17 of the CGST Act was made based on the recommendations of GST Council in its 281, 2 3 meeting. The intent of the said amendment in subsection (5) of section 17, as recommended by the GST Council in its 28th meeting, was made known to the trade and industry through the Press Note on Recommendations made during the 28th meeting of the GST Council, dated 21-7-2018. It had been clarified "that scope of input tax credit is being widened, and it would now be made available in respect of Goods or services which are obligatory for an employer to provide to its employees, under any law for the time being in force." 3. Accordingly, it is clarified that the proviso after sub-clause (iii) of clause (b) of sub-section (5) of section 17 of the CGST Act is applicable to the whole of clause (b) of sub-section (5) of section 17 of the CGS T Act. In view of above lega....
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.... 01.10.2019; effective GST rate was notified, subject to the condition. For better perspective, the relevant portion of the amending Notification No. 20/2019- Central Tax (Rate) dated 30th September, 2019 is reproduced as under: "In the said notification, - (i) in the Table, - (a) against serial number 7, for the entries relating thereto in column (3), (4) and (5), the following items and entries shall be substituted, namely, (3) (4) (5) "(i) Supply of "hotel accommodation" having value of supply of a unit of accommodation above one thousand rupees but less than or equal to seven thousand five hundred rupees per unit per day or equivalent. 6 - (ii) Supply of "restaurant service" other than at "specified premises" 2.5 Provided that credit of input tax charged on goods and services used in supplying the service has not been taken [Please refer to Explanation no. (iv)] (iii) .... .... .... And that Specified premises has been defined as under: "(xxxvi) "Specified premises" means premises providing "hotel accommodation" services having declared tariff of any unit of accommodation above seven thousand five hundred rupees per unit ....
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....ling ITC which is not available to him in a case of direct supply of Service. In this regard, we also find that the Himachal Pradesh Appellate Authority for Advance Ruling its order No. HPAAAR Order-in-Appeal No. HP/AAAR/RP-DY/FM/01/2023, dated 26th September, 2023 in the case of M/s Federal-Mogul Anand Bearings India Limited, Plot No. 5, Sector 2, Tehsil Kasauli, Parwanoo, Solan, H.P., upheld the Advance Ruling Order No. HP-AAR-21/2021-7865-68 dated 22.03.2023, passed by the Himachal Pradesh Authority for Advance Ruling. We observe that vide the Order-in-Appeal No. HP/AAAR/RP-DY/FM/01/2023, dated 26th September, 2023, following has been held: "Question 1: Whether the subsidized-deduction made by the Appellant from the Employees who are availing food in the factory would be considered as a "supply" by the Appellant under the provisions of Section 7 of Central Goods and Service Tax Act, 2017 and Himachal Pradesh Goods and Service Tax Act, 2017? And; Question 2: Whether GST is applicable on the nominal amount deducted from the salaries of its employees? And; Question 3: Whether GST would be applicable on the nominal amount deducted from the Manpower supp....