TaxTMI 
TaxTMI 
2024 (1) TMI 953
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.... 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 slip of the employees. (d) They do not avail input tax credit (ITC) on....
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....issible 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 of filing advance ruling application before the Authority. We find that, prima-facie; this Circular appears to have relevance and significant force in deciding....
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....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 personal hearing was granted to the applicant on 12.09.2023 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....
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....e 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 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 se....
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.... 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 being in force." 3. Accordingly, it is clarified that the proviso after sub-clause (iii) of clause (b) of subsection (5) of section 17 of the CGST Act is applicable to the whole of clause (b) of subsection (5) of section 17 of the CGST Act." The contention by the applicant is that the supply of food at ....
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....f 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 supply of service. But in this case supplies are provided by the employer to the employees for a consideration, though nominal. We also find that CBIC vide the Press Release dated 10.07.2017 with the description "GST on gifts", clarified that the services by an employee to the employer in the course of or in relation to his employment ....
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....inarily' 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 establishing canteen, bearing certain mandatory costs in running of the canteen by the employer in as much as the number of workers is above 250, accordingly, and the applicant has established the canteen in their premises and bears certain running cost while collecting the nominal rate, which is an activity in furtherance of their business. In this regard, the definition of 'outward supply', as per Section 2(83) o....
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....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-II of the GST Act and the amount collected by the applicant is a 'Consideration' on which GST is liable to be paid. We find that it has been claimed that they are adding 10% mark up cost on the cost of service provider for payment, but did 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, ....
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....here 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 provisions of blocked credit under Section 17(5) (b), inter-alia on food and beverages, do not apply only where, it is obligatory for an employer to provide goods and services or both to the employee under any law for the time being in force. Since, the proviso carves out an exception to the Rules/ Provisions, a strict interpretation is required to be adopted for examining its applicability. Since the contract workers are not employees of the applicant, therefore, the benefit of the above proviso will not ....
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.... 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 legal position clarified by CBIC, as second proviso to Section 17(5)(b) inserted vide CGST Amendment Act, 2018, effective from 1.2.2019, is applicable to the whole of clause (b) of sub-section (5) of Section 17 of the CGST Act, 2017, therefore, the clarification implies that the Input Tax Credit will only be available in respect of its direct employees, that too upon fulfillment of the terms and condition of Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017. The issue which is flowing out of Para 12.5 above is, whet....
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.... 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 per day or equivalent." From the facts of the case, it is clear that in the instant case, the Canteen Contractors are providing Restaurant Service at a non-specified premises at the rate 5% to the applicant, and opted for Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017, as amended, and as per the condition the service providers are not eligible to avail the ITC. Accordingly, the canteen service providers are providing the service to the workers of the applicant through applicant and paying Tax at reduced rate of 5% in terms of the Notification ibid. Th....
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....23, 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 supply contractor in case of contractual employees? Answer: Supply of food to the employees and contract workers is a supply under the provisions of Section 7 of the CGST Act, 2017 and the Himachal Pradesh Factories Rules, 1950 and accordingly, it is leviable to the GST. Question 4: Whether Input Tax Credit (ITC) of the GST charged by the Canteen Service Provider would be eligible for availment to the Appellant? Answer : Input Tax Credit will not be available to the Appellant on GST charged by the canteen service provider, in terms of provisions of the Notification No. 11/2017- Central Tax (Rate) dated 28.06.2....