TaxTMI 
TaxTMI 
2024 (2) TMI 848
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.... 4. As a part of the canteen facility, the applicant provides meals which include breakfast, lunch, dinner, tea and snacks. The applicant has entered into an agreement dated 15.7.2020 with M/s. Shashi Catering Service Private Ltd, a canteen service provider [for short- CSP], to provide food and beverages to its employees. 5. As per the aforementioned agreement, the CSP shall prepare the meals in accordance with the weekly menu specified by the applicant. Further, the applicant will provide kitchen utensils and equipment etc. (e.g. dish wash machine, work table, water cooler, table etc.), as specified in Annexure-I) of the agreement to the CSP, which shall be returned to the applicant on termination of the arrangement. 6. The applicant provides canteen facilities to its employees in terms of the Meal Policy dated 1.4.2016. Article-1 of the policy specifics the objective as under: "To provide hygienic meal to all employees of SMG as well as to SMC employees who are on deputation/business travel and to regulate this provision for other visitors. Tor the purpose of this policy meal shall signify tea and breakfast in the morning lunch/dinner followed by tea in the second....
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....¢ that it should involve quid pro quo i.e., the supply transaction requires something in return, which the person supplying will obtain, which may be in monetary terms/in any other form except in case of deeming provision as specified in Schedule-I; • that the supply of goods or services or both shall be effected by a person in the course or furtherance of business; • that though the CSP is issuing invoice to the applicant, the beneficiaries of the canteen facility are the employees of the applicant; • that the applicant only acts as a mediator between the employees and the CSP and does not retain any profit margin while recovering the amounts from its employees; • that the nominal amount recovered by the applicant from employees towards the meals, is only towards the expenditure/costs for providing such meals; • that the applicant further relies on the • ruling of the Madhya Pradesh Appellate Authority for Advance Ruling in M/s Bharat Oman Refineries Ltd. 2021-TIOL-36-AAAR-GST; • ruling of the Haryana Authority for Advance Ruling in M/s Rites Limited 2022-VILL-283-44R; • Bomb....
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....nd is not leviable to GST; that this was clarified in the Press Release issued by CBIC dated 10.07.2017; • the canteen facility provided by the applicant to its employees is in the nature of perquisite provided by the employer to the employee; • that they wish to rely on CBIC circular No. 172/04/2022-GST dated 06.07.2022; • the applicant relies on the decision/ruling of the • GAAR in the ease of M/s. Cadila Pharmaceuticals Limited 2023 (4) TMI 298; • GAAR in the ease of M/s. AIA Engineering Limited 2023 (4) TMI 297; • GAAR in the case of M/s. Troikaa Pharmaceuticals Limited 2022 (9) TMI 200; • GAAR in the case of M/s Zydus Lifesciences Limited 2022 (10) TMI 304; • GAAR in the case of M/s SRF Limited 2022 (10) TMI 305. 11. On the second issue regarding admissibility of ITC on Input service of CSP, the applicant has made the following submission viz • that the canteen services procured by the applicant from the CSP are in the nature of 'input services' u/s 2(60) of the CGST Act, 2017 since the same have been procured to be used in the course and furtherance ....
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....s at the factory premises; • Thus, in light of the above, the applicant submits that they are eligible to avail ITC in respect of the GST paid on inward supplies used for providing canteen facility to the employees on deputation and business travel and temporary workers as. such canteen service is used in the course or furtherance of business of the applicant. 13. On the fourth issue regarding admissibility of ITC on the kitchen utensils and equipment's purchased for providing canteen facility to the employees, the applicant has made the following submission viz • the applicant is obligated in the terms of the agreement to provide them with kitchen utensils and equipment like watercooler, dishwasher, plates, worktable, table etc.; • that on termination, the CSP shall vacate the premises and hand over all the kitchen utensils and equipment to the applicant; that in the instant case, the ownership over the kitchen utensils and equipment always remains with the applicant; • that the canteen facility for the employees within the factory premises has been mandated in terms of section 46 of the Factories Act, 1948; that to facili....
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....deputed personnel can avail meal facility by purchasing the coupons directly from the CSP; that 30% of the cost of the meal is borne by such personnel and 70% is borne by the applicant; • that in terms of proviso to section 17(5)(b), ITC shall be available in respect of goods and services or both, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force; • in the instant case, relying on section 2(1) and 46 of the Factories Act, 1948. the employees under deputation are engaged in the activities in relation to the manufacturing process at the factory premises. Therefore, in light of the above, the applicant submits that they are eligible to avail ITC in respect of the GST paid on inward supplies used for providing canteen facility to the personnel on deputation. However, the applicant failed to provide copy of deputation letter, as stated during the course of personal hearing. Discussion and findings 17. At the outset, we would like to state that the provisions of both the CGST Act and the GGST Act are the same except for certain provisions. Therefore, unless a mention is specifically mad....
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.... which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council shall he treated neither as a supply of goods nor a supply of services. (3) Subject to the provisions of [sub-sections (1), (1A) and (2)], the Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as - (a) a supply of goods and not as a supply of services; or (b) a supply of services and not as a supply of goods. • Section 17. Apportionment of credit and blocked credits.- [relevant extracts] 5) Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (1) of section 18, input tax credit shall not he available in respect of the following, namely:- (a) .............. (aa) .............. (ab) ..............: (b) ^18[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 (....
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.... (Amendment Act) 2018, clause (b) of sub-section (5) of section 17 of the CGST Act was substituted with effect from 01.02.2019. After the said substitution, the proviso after subclause (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 sub-section (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 cla....
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.... '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 is provided in terms of the contract between the employer and employee. We find that factually there is no dispute as far as [a] the canteen facility is provided by the applicant as mandated in Section 46 of the Factories Act, 1948 is concerned; and [b] the applicant has provided a copy of the Meal Policy. In view of the foregoing, we hold that the deduction made by the applicant from the employees who are availing food in the factory would not be considered as a 'supply' under the provisions of section 7 of the CGST Act, 2017. 23. However, the aforementioned finding is only in respect of permanent employees. It goes without saying that it would not be applicable to canteen facilities provided to employees of SMC on deputation, employees of MSIL on business travel and temporary workers [including team lease employees who are on third party roll working within the factory premises]. Employees of SMC on deputation, employees of MSIL on business travel and Temporary/Contract worker's portion of ....
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....h may be made therefore: (d) the constitution of a managing committee for the canteen and representation of the workers in the management of the canteen: (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). 27. The term 'worker' is defined under Section 2(1) of Factories Act 1948 which is reproduced as under : "worker" means a person employed, directly or by or through any agency (including a contractor) with or without the knowledge of the principal employer, whether for remuneration or not], in any manufacturing process, or in cleaning any part of the machinery or premises used for a manufacturing process, or in any other kind of work incidental to. or connected with, the manufacturing process, or the subject of the manufacturing process but does not include any member of the armed forces of the Union 28. The applicant's contention is that employees of SMC on deputation, em....
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....erefore does not fall within the ambit of entry 1 of Schedule III of CGST Act, 2017. 31. We find that the term, 'outward supply', is defined in section 2(83) of the CGST Act, 2017, as under: (83) "outward supply" in relation to a taxable person, means supply of goods or services or both, whether by sale, transfer, barter, exchange, licence, rental, lease or disposal or any other mode, made or agreed to be made by such person in the course or furtherance of business; 32. The term "business" is defined in section 2(17) of the CGST Act, 2017 as under: (17) "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 incidental or ancillary to sub-clause (a); (c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction: (d) supply or acquisition of goods including capital goods and services in connection with commencement or closure of business; (e) prov....
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....tracted below: (31) "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: (b) the monetary value of any act or forbearance, in respect of in response to, or for the inducement of, the supply of goods or services or both, whether the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government: Provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply: Since the applicant recovers the cost of food from their contractual worker, employees of SMC on deputation, employees of MSIL on business travel, there is 'consideration', as defined in Section 2(31), ibid. To summarize, the applicant has established ....
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....or Advance Ruling order No. GUJ/GAAAR/Appeal/2022/23 dated 22.12.2022 in the case of M/s. Tata Motors Ltd, Ahmedabad. 39. In view of the foregoing, we hold that Input Tax Credit will be available to the applicant in respect of canteen facility which is obligatory under the Factories Act, 1948. read with Gujarat Factories Rules, 1963. It is further held that the ITC on GST charged by the CSP will be restricted to the extent of cost borne by the applicant only taking the analogy from the ruling of the GAAAR vide its order No. GUJ/GAAAR/Appeal/2022/23 dated 22.12.2022 in the case of M/s. Tata Motors Ltd, Ahmedabad. Input Tax Credit (ITC) [employees of SMC on deputation, employees of MSIL on business travel and temporary workers [including team lease employees who are on third party roll working within the factory premises] 40. In respect of the findings recorded in para 36 supra, wherein we have held that recovery of amount from such employees/worker on account of third party canteen services provided by the applicant to employees of SMC on deputation, employees of MSIL on business travel and temporary workers [including team lease employees who are on third party roll wor....
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.... of Schedule II, sale of building. [Explanation.- For the purposes of this sub-section, the expression "value of exempt supply" shall not include the value of activities or transactions specified in Schedule III, [except.] (i) the value of activities or transactions specified in paragraph 5 of the said Schedule: and (ii) the value of such activities or transactions as may be prescribed in respect of clause (a) of paragraph 8 of the said Schedule.]: Section 17(5), ibid has already been reproduced above. 44. In terms of section 17(5)(b)(i) of the CGST Act, 2017 and notification No. 13/2018-CT (Rate) dated 26.7.2018 wherein the GST rate is without input tax credit on supply of food or any other article for human consumption or any drink at a canteen, mess etc., we hold that the applicant is not eligible for ITC on kitchen utensils and equipment like watercooler, dishwasher, plates, worktable, table etc.. 45. In the light of the foregoing, we rule as under: RULING 1) GST is not liable to be discharged on the portion of the amount recovered by the applicant from its permanent employees towards the canteen facilities provided to them in ter....