TaxTMI 
TaxTMI 
2024 (3) TMI 738
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....inding unless the law, facts or circumstances supporting the original advance ruling have changed. 4. In terms of Section 104 of the Act, where the Authority finds that advance ruling pronounced by it under sub-section (4) of Section 98 or under sub-section (1) of section 101 has been obtained by the applicant 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 applicant as if such ruling had never been made. 5. At the outset, we would like to make it clear that the provisions of both the Central Goods and Service Tax Act and the Tamil Nadu Goods and Service Tax Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Service Tax Act would also mean a reference to the same provisions under the Tamil Nadu Goods and Service Tax Act. 1. The applicant submitted a copy of Electronic Cash Ledger evidencing payment of application fees of Rs. 5,000/- each under sub-rule (1) of Rule 104 of CGST Rules 2017 ....
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....essed to report if there are any pending proceedings against the applicant on the issues raised by the applicant in the ARA application and for comments on the issues raised. 3. The concerned State authority under whose administrative jurisdiction the taxpayer falls, have vide their letter dated 19.10.2023 furnished their query-wise comments, as given below:- a. Regarding the applicability of GST on recovery of nominal amount from employees for availing the facility of Canteen, it was stated that Supply of food by employer to its employees is a transaction incidental or ancillary to main business and covered under clause (b) of Section 2(17) of CGST Act. Further in terms of Schedule-II, Clause 6 of CGST Act ibid, supply of food for valuable consideration is deemed to be supply of services, hence, it Is taxable under GST as outward supply notwithstanding that no profit is claimed by employer in providing such service.-In Re: Caltech polymers Pvt. Ltd.-2018(12) G.S.T.L. 350 (A.A.R.GST). This order has been affirmed in 2018 (18) G.S.T.L. 373 (App. A.A.R. - GST). Further, Advance Ruling of Karnataka No. KAR ADRG No. 42/2022, dated 29.11.2022 stated that the subsidized deduc....
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....rse of employment. Facility of Car extended to the employees of the Applicant-Company in the course of employment considered as supply of Services by the applicant under Sec. 7 of GST Act 2017, liable to be paid by the applicant on the value of supply under Rule 30 and 31 of GST Act 2017. f. Regarding the eligibility of ITC on expenses incurred for the well-being of employees such as vaccination and others benefits to avoid any disruption in Business, it was stated that Input Tax Credit cannot be availed on expense incurred for the well-being of employees such as vaccination and others benefits. g. Regarding the eligibility of ITC on GST charged for gardening expenses of the Applicant-Company, it was stated Gardening & Plantation is not under business requirement. It is for non-business use which will not qualify for Input Tax Credit in terms of Sec. 17(1) of CGST Act 2017. Hence Input Tax Credit is not available on GST charged for gardening expenses of the Applicant-Company. (Advance Ruling No. GST-ARA-79/2018-19/B-168, dated 24.12.2018 Maharashtra Authority for Advance Ruling) 4. The jurisdictional Central authority has not furnished any reply in this regard,....
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.... that ITC would be available on all the goods or services provided in section 17(5)(b) of the CGST Act, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force. Thus, in light of the above-mentioned Circular, ITC is available on the GST paid in relation to canteen charges, the applicant had placed reliance on the ruling of the Hon'ble Gujarat AAR in RE: Troikaa Pharmaceuticals Limited [2022-VIL-231-AAR]. It was also stated that Hon'ble Andhra Pradesh HC in RE: Ferro Alloys Corporation Ltd. vs. Government of Andhra Pradesh Labour Employment and Technical Education (Labour II) Deptt. [2003 (96) FLR 160] has held that the mode in which the specified establishment must set up a canteen is not provided in the factories Act. It is left to the discretion of the concerned establishment to discharge its obligation of setting up a canteen either directly or by employment of a contractor. • As far as the GST applicability on Insurance premium on Insurance services to dependents of the employees of the Applicant-Company is concerned, it was stated that in terms of Section 7(1) of CGST Act, an activity constitutes a supp....
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....e a supply, the same should be in furtherance of business and for a consideration. In the present case, there is no furtherance of business and in fact no consideration is involved, but recovery of partial amount only, which is reimbursement of expenses. Thus, transaction between the company and their employee are not supply of service and not liable to GST. It is reiterated that the CBIC vide Circular No. 172/04/2022-GST dated 06.07.2022 has clarified any perquisites provided by the employer to its employees in terms of contractual agreement entered into between the employer and the employee are in lieu of the services provided by employee to the employer in relation to his employment. In the instant case, as the Applicant-Company provides the transportation facility to the employees of the Company in terms of the HR policy. Accordingly, in terms of the above-mentioned Circular, recovery from employees in relation to transportation facility will not be exigible to GST. In this regard, reliance is placed on the ruling of the Uttar Pradesh AAR in RE: POCSO India Pune Processing Center Private Limited [2019 (21) GSTL 351], the ruling of the Maharashtra AAR in RE: Integrated Decisions....
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....n' since the cost of these medicines are borne by the Applicant as a part of service contract with its employees. It is submitted that, in order to avail ITC of the above supplies, the supplies should be eligible u/s. 16 of the CGST Act and should be not be blocked u/s. 17(5) of the CGST Act. It is further submitted that though there is no outright mention about ITC eligibility on preventive measures in the CGST Act, from the intention of the law, it can be derived that such expenses shall be treated as rendered for the furtherance of business. Reference in this regard, can be drawn from the Income Tax Laws. It is submitted that in RE: Commissioner of Income Tax Kerala, Vs. Malayalam Plantations Limited [1964 AIR 1722, 1964 SCR (7) 693], it was held that the term 'purpose of business 'may not include only the day to day running but may also include measure for the preservation of the business. It is further submitted that in the instant case, the Applicant merely acts as a facilitator between the employees and the medicinal perquisites provided to them. In this regard, it is submitted that CBIC vide Press Release dated 10.07.2017 had clarified that supplies made by the employer to ....
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....f C. Ex., Madurai [2016 (41) STR 867 (Tri.-Chennai)], the judgement of the Hon'ble Madras HC in RE: Commissioner of C. Ex. vs. Rane TRW Steering Systems Limited [2015 (39) STR 13 (Mad.)] PERSONAL HEARING 6.1 The applicant, after consent, was given an opportunity to be heard in person on 14.11.2023. Mr. Ganesh Kumar, Chartered Accountant, on being authorized by the Applicant, appeared for Personal Hearing. 6.2 He explained in detail the rationale behind the queries raised on behalf of the company and he reiterated the submissions made already while filing the application. During the personal hearing proceedings, he furnished an additional submission in support of their contention. He also furnished a file containing the clarifications/documents, referred to in the additional submissions made, including the copies of the relevant circular, Consent Orders issued by the Tamil Nadu Pollution Control Board, relevant case laws, Advance Rulings, etc. 6.3 To a specific query raised by the Members as to whether the canteen is run by any third party or by the company's own staff, he explained that in respect of their company at Hosur, the canteen is operated by the company's own s....
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....pects, viz.,- a. Whether GST is applicable on recovery of nominal amount by the Applicant from employees for availing the facility of Canteen at the factory premises; b. Whether' Input Tax Credit is available on facility of canteen service provided to employees by applicant as statutory obligation under Factories Act; c. Whether GST is applicable on the recovery of premium of Medical Insurance Policy from the employees for them and their dependents at actuals under the HR Policy; d. Whether GST is applicable on recovery of nominal amount from employees for using of transportation facility to and from the factory and office premises provided to the employees in the course of employment; e. Whether GST is applicable on facility of Car extended to the employees of the Applicant-Company in the course of employment; f. Whether Input Tax Credit can be availed on expense incurred for the well-being of employees such as vaccination and other benefits to avoid any disruption in Business; and g. Whether Input Tax Credit is available on GST charged for gardening expenses of the Applicant-Company Prima facie, it is observed that....
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....in the CBIC Circular No. 172/04/2022-GST dated 06.07.2022 in its para 2 of clarification to issue No.5, wherein it has been explained as follows:- "Any perquisites provided by the employer to its employees in terms of contractual agreement entered 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. 8.1.3 From the above, it could be inferred that perquisites in terms of a contractual agreement between the employer and employee are to be kept outside the ambit of GST. Accordingly, such contractual agreement filed, if any, is required to be taken up for discussion in the instant case. However, we notice that though the applicant has furnished the statement of facts, relevant legal provisions, the applicant's interpretation of law, additional submissions made during the personal hearing, and a plethora of case la....
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....mited [Advance Ruling No. GUJ/GAAR/R/2022/42], the ruling of Haryana AAR-in RE: Rites Limited [2022-VIL-283-AAR], the ruling of Gujarat AAR in RE: TATA Autocomp Systems Limited [2023-VIL-108-AAR], the ruling of Gujarat AAR in RE: ALA Engineering Limited [2023-VIL-67-AAR], and the ruling Gujarat AAR in RE: Cadila Pharmaceuticals Limited [2023-VIL-68-AAR]. We would like to place on record that an advance ruling pronounced by the Authority or the Appellate Authority shall be binding only on the applicant who had sought it, and the concerned officer or the jurisdictional officer in respect of the applicant. 8.1.6 However, keeping in mind the persuasive effect that it brings to the issue in question, we intend to take it up for discussion as well. On perusal of the Advance Rulings referred by the applicant, we notice that all the rulings are in respect of a situation where a third party engaged by the employer is the actual canteen service provider. It may be observed that in such cases, since the employer is not actually providing any service to the employees (other than bearing a portion of the canteen expenses incurred), no direct supply of service between the employer and employe....
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....supply (same category of supply or as an element of a taxable composite or mixed supply). It may be seen that a proviso after sub-clause (iii) of clause (b) of sub-section (5) of section 17 of the CGST Act is provided to clarify that the ITC in respect of such goods or services or both would be eligible where it is obligatory for an employer to provide the same to its employees under any law for the time being in force. This apart, the CBIC vide Circular No. 172/04/2022-GST dated 06.07.2022 has 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 the section 17(5) of the CGST Act, which means that ITC would be available on all the goods or services provided in section 17(5)(b) of the CGST Act, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force. Thus, in light of the above-mentioned Circular, the applicant contended that ITC is available on the GST paid in relation to canteen charges. 8.2.2 In this regard, it may be seen that Section 17(5) of the CGST Act, 2017, provides for certain situations involving supply o....
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....e use of the workers.] (2) Without prejudice to the generality of the foregoing power, such rules may provide for (a) the date by which such canteen shall be provided; (b) the standards in respect of construction, accommodation, furniture and other equipment of the canteen; (c) the foodstuffs to be served therein and the charges which may be made therefor; (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)." 8.2.4 It could be seen from the above, that when more than 250 employees are ordinarily employed, the employer is mandatorily required to provide canteen facility to the employees. In this regard, the applicant had placed reliance on the ruling of the Hon'ble Gujarat AAR in RE: Troikaa Pharmaceuticals Limited [2022-VIL-231-AAR], whe....
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.... from such employees is required to be reversed by the applicant/employer. 8.3.1 Whether GST is applicable on the recovery of premium of Medical Insurance Policy from the employees for them and their dependents at actuals under the HR Policy - As far as the GST applicability on Insurance premium on Insurance services to dependents of the employees of the Applicant-Company is concerned, it was stated by the applicant that in terms of Section 7(1) of CGST Act, an activity constitutes a supply, only when it is made by a person in the course or furtherance of business. The expression business' is defined u/s 2(17) of GST Act, but 'in the course or furtherance of business' has not been defined anywhere under GST Act. It is further submitted that the Applicant-Company is recovering premium of Group Medical Insurance Policy at actuals pertaining to the retired employees and the dependents like parents of the employees, etc. The Applicant-Company is not an insurance company and is not providing any insurance services. The service of insurance has been provided by insurance company and the Applicant-Company collected insurance premium at actuals for retired employees and remits the same ....
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....hat they are not providing any insurance services. Under the facts and circumstances of the instant case, since the Applicant company recovers the premium in actuals from the employees (the service receivers) and remits the same to the insurance companies (the service providers), we observe that the role of the applicant company is restricted to being a facilitator in the transaction involved and that they do not involve themselves in any supply of insurance service to the employees or their dependents. 8.3.4 In terms of Section 7(1) of CGST Act, an activity constitutes a supply, only when any goods/services are supplied by a person for a consideration in the course or furtherance of business. Therefore, to constitute a supply, basically there should be a flow of goods/services, the supply should be made for a consideration, and that the same should be made in the course or furtherance of business. We observe that it is clear in the instant case that no consideration accrues to the applicant, either directly or indirectly, as the premium amount payable to the insurance company is reportedly received on actual basis from the employees and remitted back to the insurance company. W....
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....ses provided to the employees in the course of employment-Regarding the GST applicability on recovery of nominal amount from employees for using of transportation facility to and from the factory and office premises, it was stated by the applicant that as per the term 'supply' as defined under Section 7 of CGST Act, in order to constitute a supply, the same should be in furtherance of business and for a consideration. In the present case, the applicant avails 'renting of motor vehicles service', 'cab services' through third party, to provide this facility to the employees. Accordingly, they contended that there is no furtherance of business and in fact no consideration is involved, but recovery of partial amount only, which is reimbursement of expenses. Thus, transaction between the company and their employee are not supply of service and not liable to GST. It is reiterated that the CEIC vide Circular No. 172/04/2022 GST dated 06.07.2022 has clarified any perquisites provided by the employer to its employees in terms of contractual agreement entered into between the employer and the employee are in lieu of the services provided by employee to the employer in relation to his employm....
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....nt, and that it is being availed reportedly through 'renting of motor vehicles service', 'cab services', etc., through a third party. Therefore, it becomes clear that in the instant case, the cab operators are the actual services providers, and that the applicant is not involved in any supply of transportation service to the employees, Further, in the instant case the applicant themselves pay up the actual cost of transportation to the service providers, i.e., the cab operators, but recovers only a nominal portion of the transportation cost from the employees, whereby the remaining portion of the transportation cost is borne as expenditure by the applicant. Further, since the nominal amount recovered from the employees forms part of the total cost reimbursed to the transportation service providers, no consideration actually accrues to the applicant in the instant case as well. 8.4.5 In this regard, reliance is placed by the applicant in support of their stand on the ruling of the Uttar Pradesh AAR in RE: POCSO India Pune Processing Center Private Limited [2019 (21) GSTL 351], the ruling of the Maharashtra AAR in RE: Integrated Decisions and Systems Private Limited [Advance R....
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....ng to provide the facility of car lease to the employees of the Company in terms of the HR policy, the same is a perquisite for the employees. Accordingly, the applicant contended that in terms of the above-mentioned Circular, recovery from employees in relation to car lease premium will not be exigible to GST. 8.5.2 In the instant case, the Applicant-Company reportedly pays the lease premium directly to car leasing company, and the overall salary cost of the related employees will get reduced to the extent of cost incurred by Applicant-Company to extend the expense incurred in relation car facility provided to employees for office purpose. However, wo notice that the circumstances relating to the car lease premium differs basically from the other cases discussed above in view of the fact that these types of car facility are normally provided to a few specific employees of the organisation, and that they are not general in nature like the canteen facility, insurance facility or the mass transportation facility. 8.5.3 Notwithstanding the same, in order to ascertain whether the instant transaction constitutes a 'Supply' or not, the basic fact as to whether the facility extended....
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....iscussed under the Income Tax Act, where it has been stated in Section 17(2) as follows:- "perquisite" includes (i) the value of rent-free accommodation provided to the assesses by his employer; (ii) the value of any concession in the matter of rent respecting any accommodation provided to the assessee by his employer; (iii)-----------" it could be further inferred from the above, that any service rendered free of charge, or, any service rendered on a concessional basis shall qualify as a perquisite. We find that in the instant case, having paid the lease premium directly to car leasing company, the applicant deducts the amount to the extent of cost incurred by Applicant-Company from the Salary of the related employees, as admitted by them. 8.5.7 Once the applicant themselves admit that they do not bear any cost, or any portion of the cost incurred, and when the entire lease premium is recovered from the salary of the employees concerned, we are of the opinion that the amount recovered do not qualify as a 'perquisite' by any means whatsoever, and therefore the transaction in the instant case, do not. get covered within the ambit of entry 1 ....
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....rovides it free-of-cost to the employees. In view of the above provisions and judicial precedents, the applicant stated that as the GST discharged on expenses related to medicinal facilities to tire employees, is for the furtherance of business, and the ITC thereto is not blocked u/s. 17(5) of the CGST Act, the ITC on such expenses shall be allowed. 8.6.2 In this case, we notice that the applicant seeks clarification on whether ITC is blocked under section 17(5) of the CGST Act, 2017, in respect of the GST involved on the expenses related to medicinal facilities extended to the employees. The applicant had contended that such medicines cannot be considered as 'goods used for personal consumption' since the cost of these medicines are borne by the Applicant as part of service contract with its employees. They have further contended that a transaction involving such services, on which GST has been paid to a third party, would not attract further GST when the employer provides it free of-cost to the employees, and therefore the ITC thereto is not blocked under section 17(5) of the CGST Act, 2017. 8.6.3 At the outset, we would like to make it clear that liability to GST, and ITC ....
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....become absolutely distinguishable from the instant case. Further, we notice that basically, the GST law places a bar on the availment of ITC in respect of the goods or services used for personal consumption, like food and beverages, outdoor catering, beauty treatment, healthy services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, etc., as enumerated under 17(5)(b)(i) of the CGST Act, 2017. In this regard, we find that the only respite available to the applicant in the form second proviso to Section 17(5)(b) of the CGST Act, 2017, also stands exhausted as discussed above, and therefore we hold that Input Tax Credit cannot be availed on the expense incurred for the wellbeing of employees such as vaccination and other health benefits extended to them. 8.7.1 Whether Input Tax Credit is available on GST charged for gardening expenses of the Applicant-Company - As far as the ITC admissibility on Gardening Expenses is concerned, the Applicant states that they are maintaining a garden at the factory estate of the Company to meet the requirements of Tamil Nadu Pollution Control Board guidelines requiring the development of a green belt in and around the fac....
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....ees per Hectare". Likewise, vide another Consent Order No. 2105237138783 dated 12.04.2021, it has been laid out under SI. No. 4 of the 'Additional Conditions' as "4. The unit shall continue to develop more green belt in and around the unit's premises". On perusal of the said consent orders, it is seen that the same were issued under Section 21 of the Air (Prevention and Control of Pollution) Act, 1981, as amended in 1987 (Central Act 14 of 1981), and the rules and orders made thereunder. 8.7.5 It is seen that the definition of 'Input Service' as provided under Section 2(60) of the CGST Act, 2017, "means any service used or intended to be used by a supplier by the course or furtherance of business", and it begins with the word "any". Likewise, Section 16(1) of the Act, that provides for eligibility and conditions for taking ITC, also encompasses the phrase "be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business", which again contains the word "any". We observe that the above legal provisions relating to availment of ITC gives it a wider connotation to incl....
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....rious issued of Section 17(5) of the CGST Act, has observed in para 2 to query No. 3 as follows :- "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." 8.7.8 Having been mandated by the Tamil Nadu Pollution Control Board under Section 21 of the Air (Prevention and Control of Pollution) Act, 1981, as amended in 1987 (Centred Act 14 of 1981), and the rules and orders made thereunder, as discussed in detail above, it is observed that gardening and maintenance of green belt in and around the unit's premises is an activity in the course or furtherance of business that is man....