TaxTMI 
TaxTMI 
2024 (3) TMI 738
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....anged. 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 and SGST Rules 2017, 2.1 The applicant, a GST Registrant, is a Private Limited company under the ....
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....sed. 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 deduction made by the applicant from employees who are availing food in factory considered as supply of Canteen Services by the applicant under Sec. 7 of GST Act 2017, liable to be pai....
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....y 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, and it is construed that there are no proceedings pending on the issues raised by the applicant. 5. On interpretation of law, the applicant states that - * The provision of the canteen services to employees is not being carri....
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....ntioned 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 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 Ap....
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....tween 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 and Systems Private Limited [Advance Ruling No. GST-ARA-116/2019-20/B-113]. * On the GST Applicability on facility of Car extended to employees in the course of employment, it was stated that the Applicant-Company has proposed to provide the facility of car to its employe....
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....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 the employees based on their contractual agreements would not be subjected to GST. It had been further clarified 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. In v....
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....nesh 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 staff and in respect of the other unit at Bhatti, Himachal Pradesh, it is outsourced. 6.4 The Members further enquired about the nature of recovery of amounts from the employees relating to canteen, Insurance, Transportation, Car Leasing, etc. The Representative replied that in respect of Canteen and mass transport....
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....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 all the queries relate either to admissibility of input tax credit (ITC), or to applicability of GST, whereby the queries in question get covered under Section 97(2)(d) and 97(2)(c) of the CGST Act, 2017, and accordingly, the application is liable for admission. 8. Accordingly, we intend to carry out an issue-wise discussion on the basis of applicable legal provisions and ....
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....ment. 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 laws/rulings, they have not furnished copies of any such employment contracts/agreements, or even the excerpts from the same, concerning the issue in question. Under these circumstances, no further discussion could be made on this aspect. 8.1.4 Notwithstanding the above aspect relating to employment contracts, it may be seen that in order to place any service provided by the employer to emp....
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.... 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 employee is involved. Whereas in the instant case, the applicant admittedly runs the canteen on his own account whereby they become the provider of canteen service to the employees. When a specific query on this aspect was raised by the Members during the personal hearing on 14.11.2023, the authorized representative clarified that in respect of their company at Hosur (applicant), the canteen is operated with the assistance of compa....
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.... 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 of goods or services, where ITC is blocked, and it reads as below :- "(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: (a) ....................................... (b) the following supply of goods or services or both (i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery....
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.... 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], wherein it was held that ITC on GST paid on canteen facility is admissible on the food supplied to employees subject to the condition that burden of GST have not been passed on to the employees of the company. In other words, ITC on the above will be restricted to the extent of cost borne by the applicant for providing canteen services to its employees, but disallowing the proportionate credit to the extent embedded in the cost recovered from such employees. This is in view of the fact that once the incidence of tax is actually borne by the ultimate consumer of service, i.e., ....
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....iness' 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 to the insurance company. It was also stated that as per definition of 'business', The collection of premium of insurance policy is not the business of the applicant. Moreover, this activity or transaction is not in connection with or incidental or ancillary to the business of the applicant. 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 tire employer in relation to hi....
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.... 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. We also observe that the applicant company is not into the business of insurance, and that they are neither operating as an insurance agent on their own account in respect of their employees and their dependents, nor, they are involved in supply of health insurance service to the public. Thereby, we are of the view that the applicant is just a facilitator in the transaction relating to insurance, and practically no supply of service is made in the course or furtherance of business by the applicant in the instant case. Since the provision of this insurance cover to the employees and their depen....
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....nded 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 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, the applicant stated that in terms of the above-mentioned Circular, recovery from employees in relation to transportation facility will not be exigible to GST. 8.4.2 The concerned State authority had stated that the recovery of premium of Medical Insurance Policy is considered as supply of Services by the applicant under Section 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 20....
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....ransportation 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 Ruling No. GST-ARA-116/2019-20/B-113]. In the additional submissions made during the personal hearing, they relied further on the ruling of Gujarat AAR in RE: TATA Autocomp Systems Limited, the ruling of Gujarat AAR in RE: Brandix Apparel India Private Limited, and the ruling of Gujarat AAR in RE: SRF Limited, mentioned supra. Though such advance rulings are binding only on the applicant who had sought it, the same are considered for discussion keeping in mind the persuasive effect that it brings to the issue. On perusal of the Advance Rulings referred by the applicant, we notice that all the rulings rela....
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....ded 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 qualifies as a 'Perquisite' or not, is required to be determined in the instant case. It is seen that the applicant claims that the same is a 'perquisite' for the employees and in terms of the CBIC Circular dated 06.07.2022, recovery from employees in relation to car lease premium will not be exigible to GST. 8.5.4 In this regard, it may be seen that entry 1 of Schedule III of the CGST Act, 2017, states as follows "services by an employee to employer in the course of or in relation to his employment" shall be neither supply of goods nor supply of services. It could be seen here that Schedule III basically de....
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....cts 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 of Schedule III of the CGST Act, 2017. Moreover, we observe that in such cases, the cars are normally booked under the name of the company/organization, and it remains with them for a specific period, or until the lease period is over. Therefore, when the applicant provides the said service to their employees on their own account, and when the clement of 'perquisite' is absent in the instant case, we hold that under the circumstances of the case, GST is applicable on the facility of Car extended to the employees of the Applicant-Company, even if it is in the course of employment. 8.6.1 Whether Input Tax Credit can be availed on expense incurred for the ....
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....d 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 eligibility are two different legs of a transaction which operate independently of each other. Accordingly, we are of the opinion that the applicant's attempt as above to link the ITC eligibility to GST liability or otherwise, is grossly misplaced, Further, considering the fact that the instant query relates to ITC eligibility on medicines provided to employees free of cost, we turn our attention to ITC eligibility on this aspect. The applicant's contention that medicines cannot be considered as 'goods used for personal consumption' in die instant case, stems from the fact that the cost of these medicines are borne by the Applicant as a part of service contrac....
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....n 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 factory premises. It is submitted that as the maintenance of a garden at the factory premises is required by the law, the credit thereof shall be allowed. It is further submitted that the definition of the Terms of 'input' and 'input services' are wide enough to cover gardening services as input services. The definition of the terms begins with 'any', which enables it to cover any services, which is used for the furtherance of business. It is submitted that in RE: Grasim Industries Limited vs. Collector of Customs [2002 (4) TMI 52-SUPREME COURT], the Hon'ble Apex Court had held that the elementary principle of interpreting any word while considering statute is to gathe....
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....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 include those inputs and inputs services that are used or intended to be used in the course or furtherance of his business. 8.7.6 In support of their stand that ITC is eligible on gardening expenses, the applicant has stated that in RE: Ordinance Factory, Bhandara [2020 (38) GSTL 530 (AAAR-GST-Mah)], the AAAR had held that where the State Pollution Control Board has mandated the requirement of maintenance of garden inside the factory, the said service would qualify as 'input service' and the ITC thereon would be available. The applicant had also relied on other ruling like RE: ThyssenKrupp Eletrical Steel (India) Private Limited vs. Commissioner of Ex. [2017 (3) GSTL 176 (Tri.....
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....ployer 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 mandatorily required to be carried out by the applicant. Accordingly, we hold that ITC is available on the input services received by the applicant in the instant case, in relation to gardening activities carried out within the factory premises. 9. In view of the above, we rule as under; RULING (a) GST is liable to be discharged by the applicant on the amount charged on the employees by the applicant, for the supply of canteen service on its own account to its employees, in view of the reasons discussed in paras 8.1.6 and 8.1.7 supra. (b) ITC is eligible on the inward supplies received, if any, in relation to the provision of food to the employees, provided the number of direct employe....