TaxTMI 
TaxTMI 
2025 (4) TMI 802
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....if GST is applicable in respect of employee recovery towards bus transportation facility, whether the Applicant would be exempted under the Sl. No. 15 of Notification No. 12/2017-Central Tax (Rate)? Question 4: Whether input tax credit is eligible on bus transport service and canteen service procured from third party supplier to the extent the cost is borne by the Applicant? Question 5: Even if GST is payable in respect of aforesaid employee recoveries, what would be the value on which GST is payable? At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further, henceforth for the purposes of this Advance Ruling, the expression 'GST Act' would mean CGST Act and MGST Act. 1. FACTS AND CONTENTION - AS PER THE APPLICANT: 1.1 Lear Automotive India Pvt. Ltd. (hereinafter referred to as 'Applicant') is a company having its registered office at E-25, 26 & 27, MIDC, Bhosari, Pune, Maharashtra 411....
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....a Canteen and Transportation Deduction Guidelines (hereinafter referred to as "Canteen/Transport Policy') wherein the Applicant will be providing quality food and refreshments to employees at subsidized rates in the company premises. 1.7 The present application is filed in respect of applicability of Goods and Services Tax (hereinafter referred to as "GST") payable on the recoveries made by the Applicant from its employees for providing the canteen and bus transportation to its employees. Canteen & Bus Transportation 1.8 The Applicant provides canteen and transportation facility to its employees at the Bhosari and Chakan Units based on the employment terms of the Applicant. Further, for providing the canteen facility to the employees, the Applicant has introduced a separate canteen policy. Based on the agreed terms between the Applicant and Employees, the Applicant is entitled to make recoveries at subsidized rates for the canteen and bus transportation facility provided by the Applicant at its factory and corporate office. The relevant clauses of the Canteen Policy are extracted below: "GUIDELINES Canteen • Employees to avail the canteen facili....
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....ties are provided at subsidized amount and forms part and parcel of the employment arrangement. The said facilities are provided merely to facilitate better working environment to the employees and does not carry intention to undertake any kind of business activity. The said facilities are towards providing hygienic food and to maintain safety for the employees who work in the shifts as well as to maintain the continuity in manufacturing and research & development work. The factories of the Applicant are located in remote locations. It is submitted that safety for employees and more particularly female employees is very important. Hence, the Applicant provides the bus transportation facility to ensure the safety of the employees and to provide a better working environment. 1.14 Under the aforesaid circumstances, the Applicant seeks the present advance ruling to understand whether the canteen and bus transportation recoveries made by the Applicant are taxable under the GST laws and whether the transportation facility provided to the employees in Non-AC buses having contract carriage permit would be exempted from GST? Apart from the taxability, the Applicants also seeks the advanc....
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....aken or proposed to be undertaken by the Applicant;" ... Emphasis Supplied 2.6. Perusal of the above clarifies that the advance ruling can only be sought on the issues, as are specified under Section 97 (2) of the CGST Act, which reads as under: - Section 97. Application for advance ruling: (2) The question on which the advance ruling is sought under this Act, shall be 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 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." ... Emphasis Supplied 2.7. In view of the above, it is submitted that an advance ruling can be sought ....
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....aharashtra Authority for Advance Ruling. 2.11 In view of the foregoing, the Applicant submits that it is eligible to file the present advance ruling application before the Maharashtra Authority for Advance Ruling, Mumbai, appointed vide Notification No. MGST-1017/CR 193/Taxation, dated 24.10.2017 read with Section 99 of Maharashtra Goods and Service Tax Act, 2017. A. Applicant's Interpretation with respect to the recoveries made from the employees for providing Canteen facilities to its employees are provided in the below grounds which are without prejudice to each other. 1.1 The employee recoveries for providing canteen facility and also for providing bus transportation service is not covered under the ambit of "supply" under Clause (a) of Section 7 (1) of the CGST Act. 1.1.1 In order to analyse the present issue, reference is made to Section 7 (1) of the CGST Act, which defines the term 'supply' as under: 7. (1) For the purposes of this Act, the expression "supply" includes - (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration b....
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....by way of totalisator or a licence to book maker in such club; and (i) any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities; ... Emphasis Supplied 1.1.4 A bare reading of the above clause (a) provides that the term "business" includes any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity whether or not it is for pecuniary benefits. Also, as per clause (b) any activity ancillary or incidental to the activities covered under clause (a) are also treated as business. Further, clause (c) also states that any activity or transaction falling in the above categories would be business whether or not there is volume, frequency, continuity or regularity in transactions. Hence, the above definition provides that business includes any activity in the nature of trade, commerce, manufacture, etc. 1.1.5 The Applicant reiterates that 'supply' can come into existence only when there is any activity done in the course of business or furtherance of business. It is clear from the above discussion that business means any activity ....
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....rty service provider only. The Applicant is merely acting as a conduit to provide the canteen facility. 1.1.10 Therefore, it is submitted that Applicant is not in the business of providing catering facility. Further, providing/ non-providing such canteen facility will not affect the business of Applicant in any way. Hence, the canteen facility cannot be said to be a business activity of the Applicant and hence, the provision of canteen facility to the employees cannot qualify as supply. 1.1.11 The Applicant also submits that the business of manufacturing, cooking, packing, supplying food items is strictly regulated in India under the Food Safety and Standard Act, 2006 ("FSSAI Act"), The Applicant is acting as a facilitator in the transaction between the third-party contractor and employees. Therefore, the Applicant does not hold a license to carry out food related business. Had the Applicant engaged in the business of canteen services, the Applicant would have been required to obtain registration and undertake necessary compliance under the FSSAI regulations. The relevant provisions under FSSAI Act are extracted below: "Section 3 (l) (n) 'Food business" means any und....
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....ty cannot be equated with business. 1.1.16 In this regard, reliance can be placed in the case of State of Gujarat vs. Raipur Manufacturing Co. Ltd. (Civil Appeal No. 603 of 1966) wherein the Petitioner was engaged in the business of manufacturing and selling cotton textiles. The Petitioner purchased coal for usage in business of cotton textiles. The said coal was later sold by the Petitioner. The Supreme Court held that the Petitioner was not engaged in the business of coal. The operative part of the judgement is extracted below: "8. It is clear from these cases that to attribute an intention to carry on business of selling goods it is not sufficient that the assessee was carrying on business in some commodity and he disposes of for a price articles discarded, surplus or unserviceable. It was urged, however, on behalf of the State that where a dealer with a view to reduce the cost of production disposed of unserviceable articles used in the manufacture of goods and credits the price received in his accounts, he must be deemed to have a profit motive, for it would be uneconomical for the business to store unserviceable articles and to survive as an economic unit. But the quest....
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....ing coal lay upon the Sales-tax authorities and if they made no investigation and have come to the conclusion merely because of the frequency and the volume of the sales, the inference cannot be sustained. ....Emphasis Supplied 1.1.17 It is also submitted that as per clause (b) of Section 2 (17), business also includes any activity which is in connection with or incidental or ancillary to the activities covered under eave clause (a) of Section 2 (17) of the CGST Act. Hence, one may question as to whether the provision of canteen facility can be said to be in connection with or incidental or ancillary to the principle business of seats of motor vehicles. 1.1.18 In this regard, the Applicant submits that the connected activities or incidental or ancillary activities cannot be construed to include all activities carried out by the business. Furthermore, as per Black' s Law Dictionary (Ninth Edition), "incidental" means dependent upon, subordinate to, arising out of or otherwise connected with (something else, usually of greater importance). Also, the term "ancillary" is defined in the Black's Law Dictionary (Ninth Edition) as supplementary; subordinate. 1.1.19 The activiti....
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....s whether the assessee meant to run the fair price shop as a trade or commerce or a commercial activity. We do not find it possible to say that the fair price shop is a commercial activity of the assessee. We hold that the assessee is not carrying on the business of selling commodities in the fair price shop in a trade or commercial sense, and that, therefore, it is not with reference to the fair price shop a dealer within the meaning of the Act. .... Emphasis Supplied 1.1.21 In the case of Panacea Biotech Limited vs. Commissioner of Trade and Taxes [(2013) 59 VST 524 (Del.)] the issue was related to whether the selling of used cars is ancillary or incidental to the pharmaceutical business of the assessee. The Hon'ble Delhi High Court held that: "11. In the present case, the main business of the petitioner is manufacture and sale of pharmaceutical products and the vehicles are used by it in the course of business (as written by Respondent No.- 2 in the impugned order (Annexure A-1)). This may lead to the inference that proceeds from the sales of such vehicles should have been included in the turnover and must be taxed accordingly. But the selling of used cars cannot ....
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.... that transportation facility provided by the Applicant to its employees is not related to or connected with the principle business of supply of seats of motor vehicles in that manner. Hence, the activity is not even incidental or ancillary to the main business of the Applicant. Hence the Applicant cannot be asked to pay GST on transport recoveries. 1.2 Without prejudice to the above, the canteen facility and bus transportation facility provided by Applicant is excluded from the scope of supply in terms of Clause (a) of Section 7 (2) of the CGST Act. 1.2.1 The Applicant also submits that the canteen facility and bus transportation facility provided by the Applicant is specifically excluded from the coverage of 'supply' under GST as per Clause (a) of Section 7 (2) of the CGST Act which reads as below: "Section 7 (2) Notwithstanding anything contained in sub-section (1), - (a) activities or transactions specified in Schedule III; or (b) such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendatio....
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....r submitted that the Canteen Policy is a part and parcel of the employment terms and conditions. 1.2.7 As discussed in the above paragraphs, the Applicant is providing these facilities to the employees due to their-agreed terms. The Applicant is recovering the subsidized amount of canteen facility to the employee in terms of the Canteen Policy. Therefore, it is clearly established that the canteen facility is directly in connection with the employment of the employees. 1.2.8 Also, as per the Press release issued by the Ministry of Finance dated 10 July 2017 which states the following: "Another issue is the taxation of perquisites. It is pertinent to point out here that the services by an employee to the employer in the course of or in relation to his employment is outside the scope of GST (neither supply of goods or supply of services). It follows therefrom that supply 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. Further, the Input Tax Credit (ITC) Scheme under GST does not allow ITC of membership of a club, health and fitness center [section 17 (5) (b) (it)]. It fo....
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....y the Applicant towards the parental insurance cost of its employees. This Hon'ble Authority vide its Order No. GST-ARA-19/2019-201B-108 Mumbai dated 04-10-2019 has ruled that the employee recovery would not be treated as 'supply' since the activity of recovering the amount from employees does not satisfy the conditions of Section 7. The below extract of the Advance Ruling is reproduced for ready reference: (3) The issue put forth before us is very limited. We find from the documents of insurance scheme submitted on record that the applicant provides Mediclaim cover to their employees' parents. There are four types of category of scheme wherein sum insured amount for family floater is at Rs. 300000/-and premium amount is fixed as per the number of parents involved therein. The applicant will year 50% amount for maximum 2 members only and rest of money will be paid by respective employee. It is cashless Mediclaim insurance policy for the lock-in period of 3 years. The Mediclaim Insurance policy is made from "The Oriental Insurance Company Ltd". Further we find from the sample copy of insurance policy submitted before us by the applicant that the applicant Initially pays the....
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....re Private Limited [2019] (2) TMI 631. In the said case, this Hon'ble Authority was examining similar issue whether the recovery of 50% parental insurance premium amount from the employees would be treated as supply or not in order to avail Input Tax Credit of input services. This Hon'ble Authority vide Order No. GST-ARA-36/2018-19/B-110 Mumbai dated 07-09-2018, has ruled that the employee recovery would not amount to supply. The relevant extract is reproduced as below: "We find that the applicant is paying the premium towards Mediclaim taken for their employees and the parents of such employees. Against such payments made they are recovering 50% from their employees There is no way that the 50% amount recovered can be treated as amounts received for services rendered, since this entire amount is paid to the insurance company which is providing Mediclaim facilities to the employees and their parents. Such recovery of premium amounts by the applicant from their employees cannot be supply of services under the GST laws. In fact, what is happening in this case is that since the applicant is recovering 50% of the premium paid on Mediclaim from their employees, they want to tre....
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....lity. In other words, employer-employee relationship is must to avail this facility. 5.3.2 In the subject case we find that the applicant is not providing transportation facility to its employees, in fact the applicant is a receiver of such services in the instant case. The applicant's contentions that they are eligible for exemption from GST under SI. No. 15 (b) of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 in respect of nominal amounts of recoveries made from their employees to wards bus transportation service, is not correct. The exemption under the said notification is available only when the supply is taxable in the first place. In the subject case, the transaction between the applicant & their employees, due to "Employer-Employee" relation as stated by the applicant in their submissions, is not a supply under GST Act. 5.3.3 To answer the second question we now refer to Schedule to the CGST Act which lists activities which shall be treated neither as a supply of goods nor a supply of services as per clause I of the said Schedule-III, Services by an employee to the employer in the course of or in relation to his employment shall he treated ne....
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....rictions as may be prescribed and, in the manner, specified in section 49, 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 and the said amount shall be credited to the electronic credit ledger of such person. 1.4.3 Further, Section 17 (5) of CGST Act, specifies the supplies in respect of which HTC would not be available. 1.4.4 As per Section 17 (5) (b) of the CGST Act, ITC in respect of food and beverages and outdoor catering will not be available. However, as per the proviso to Section 17 (5) (b) of CGST Act, input tax credit in respect of food, beverages and outdoor catering etc. will be available in case the employer is under obligation to provide the said services under any law for the time being in force. The relevant extract of the said provision is reproduced below: (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 cl....
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....eligible to claim the ITC in respect of the GST paid on the cost borne by the Applicant for providing the canteen facility to the employees as the same is mandated under Section 46 of the Factories Act, 1948. B. Applicant's Interpretation with respect to the recoveries made from the employees for providing Bus Transportation facilities to its employees are provided in the below grounds which are without prejudice to each other. 1.1 The employee recoveries for providing bus transportation facility is not covered under the ambit of "supply" under Clause (a) of Section 7 (1) of the CGST Act. 1.1.1 The Applicant is procuring bus transportation facility from a third-party bus transportation service provider for transportation of its employees in Non-AC buses. Accordingly, the said service provider issues tax invoice with applicable GST to the Applicant. The Applicant is using the said bus transportation facility for transportation of its employees from place of work to home and back. Therefore, the Applicant recovers subsidized amount for the said transportation facility from its employees. 1.1.2 As discussed above, the Applicant is a company involved in the business of deve....
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.... applicable on nominal amount recovered by Applicants from their employees for usage of employee bus transportation facility in non-air-conditioned bus. 5.3.1 Applicant has submitted that they issue pass only to their employees, so that the transportation facility can be used by such employees, for which nominal amount is recovered on monthly basis. They have also submitted that once, employee ceases to be in employment with Applicant, he/she is not authorized to use the transportation facility. In other words, employer-employee relationship is must to avail this facility. 5.3.2 In the subject case we find that the applicant is not providing transportation facility to its employees, in fact the applicant is a receiver of such services in the instant case. The applicant 's contentions that they are eligible for exemption from GST under SI. No. 15 (b) of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 in respect of nominal amounts of recoveries made from their employees to wards bus transportation service, is not correct. The exemption under the said notification is available only when the supply is taxable in the first place. In the subject case, the t....
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....riff 996411. Therefore, the local passenger transportation facility within the city in the given case in hand, if classified as service would merit classification under the Tariff 996411 only. Further, the Explanatory Notes issued by the CBIC also provides that the services provided by bus within city limits would be very well classified under Tariff 996411. The Explanatory Notes also provides that the renter defines the travel routes in case of passenger transportation services. In the given case, the said conditions are satisfied. Hence, without prejudice to above submission, in case the bus employee recovery qualifies as supply of service, the said service would be classified under Tariff 9964 only. 1.4 Therefore, without prejudice to the above submissions, even in case where the bus transportation facility provided by the Applicant to its employees amount to supply, the said services would be exempted by virtue of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 (hereinafter referred to as 'Exemption Notification'). 1.5 The Applicant further submits that as per SI. No. 15 (b) of the Exemption Notification, "Non-airconditioned contract carriage other than radio....
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....e that, as per Section 16 of CGST Act, a person can avail ITC in respect of goods or services or both, which are used or intended to be used in the course or in furtherance of business. Further, Section 17 (5) of CGST Act, specifies the supplies in respect of which ITC would not be available. 1.3 As per Section 17 (5) (b) read with Section of CGST Act, ITC in respect of renting or hiring of motor vehicles which are used for the transportation of persons and having approved seating capacity of not more than thirteen persons (including the driver) will not be available. In other words, ITC on renting or hiring of motor vehicles which are used for transportation of persons and having approved capacity of more than thirteen persons will be available. The relevant extract of the said provision is reproduced 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) motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver), except when they are used for ma....
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.... is liable to pay the GST only on the amount of recoveries made towards providing the canteen facility. 1.1 Without prejudice to the above, it is humbly submitted that even if it is assumed that the Applicant is liable to discharge the GST on the canteen recoveries made, the Applicant is liable to discharge the GST only on the amount of recoveries made on providing the canteen facility. 1.2 In this regard, reliance can be placed on press release issued by Ministry of Finance dated 10th July 2017, wherein it is clearly stated that GST will not be applicable in case free housing is provided to the employees in terms of the contract between the employer and employee and the same is part and parcel of the cost to company. In other words, GST will not applicable, in case, any free facility provided by the employer to its employee as per the contract entered into between them and when the same is treated as cost to company. For better understanding, the relevant part of said press release is reproduced below: 7.3 "Another issue is the taxation of perquisites. It is pertinent to point out here that the services by an employee to the employer in the course of or in relation ....
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....ubsidized rates for the canteen and bus transportation facility provided to their employees. 3.3 In view of the above, Taxpayer is seeking an advance ruling to determine whether the recoveries made by them from their employees for providing food and transportation facilities is taxable under the GST laws. Department submissions in this regard are given below: Q 2.1: This advance ruling is sought to ascertain whether the recoveries made by the Applicant from the employees for providing canteen facility to its employees is taxable under the GST laws and Q 2.2: This advance ruling is also sought to ascertain whether the recoveries made by the Applicant from the employees for providing bus transport facilities to its employees is taxable under the provisions of CGST Act? DEPARTMENT SUBMISSIONS: As taxpayer is providing canteen and bus transportation facility to its employees. The canteen and bus transportation facilities, ensuring that their employees are able to reach the factory and offices in time for doing their day to day work as scheduled and to perform their work with efficiency. Further, for providing these facilities to their employees, they have int....
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....efinition of related person by virtue of serial no (iii) of point (a) of Explanation to section 15 (5) of CGST Act. In view of the facts and legality discussed in terms of Section 7 of the Central Goods and Services Tax Act, 2017 (CGST Act), for a transaction to qualify as supply, it appears to be essentially in the course or furtherance of business through agreement amounting to tolerate an act. The provision of transport facility as well as canteen facility to the employees is a welfare, security and safety measure through agreement amounting to tolerate an act. Hence, this office is view that GST is leviable on amount recovered from employees on account of canteen facility and bus transportation facility through tolerate an act activity by the taxpayer. Q 2.3. Without prejudice, even if GST is applicable in respect of employee recovery towards bus transportation facility, whether the Applicant would be exempted under the SI. No. 15 of Notification No. 12/2017-Central Tax (Rate)? DEPARTMENT SUBMISSION: As their relation with their employees are amounting to tolerate an act, which has been binding as per the agreed terms between employer and employees made during appoi....
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....Law. The Applicant is before this authority for seeking clarification as to whether the recoveries made by the Applicant from the employees for providing canteen facility and transportation service to its employees is taxable under the GST laws. (1) Lear Automotive India Pvt. Ltd. (hereinafter referred to as 'Applicant') is a company having its registered office at E-25, 26 & 27, MIDC, Bhosari, Pune, Maharashtra 411026 and having its plant at No 629, Talegaon-Chakan Rd, Chakan, Maharashtra 410501. It is engaged in the manufacture and sale of seats for motor vehicles. (2) We observe that, in order to comply with the obligation under Factories Act 1948, Applicant provides canteen facility to all the workers through a third-party Canteen Service Provider. (3) At the time of appointment, the Applicant issues an appointment letter to its employees, which inter alia contains various terms and conditions of employment, including remuneration, qualification, allowances, termination, notice period, etc. In addition to this, there is a contractual agreement with all the workers wherein it is stipulated that amount of Rs. 550 per worker will be deducted each for can....
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....es' or 'transportation services' cannot be regarded as 'in the course or furtherance of business'. CGST Act, 2017 defines the expression 'business' under section 2 (17) of the CGST Act, 2017. The definition of 'business' as given in Section 2 (17) of the CGST Act, 2017 is 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 ........ ........ This is an inclusive definition wherein various aspects have been listed in the clauses that would be included in 'business'. Clause '(a)' of this definition mentions various activities like trade, commerce, manufacture, profession, vocation, adventure, wages or any other similar activity. Thus, this clause covers these activities or any other similar activities. The last phrase 'whether or not it i....
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....nsignificant activity in terms of volume of transaction, still in terms of clause (c) of the aforesaid section, the activity of supply of canteen and transportation services, falls within the definition of "business". (4) Thus, as discussed above, the activity of supply of canteen services and transportation services provided to the employees falls under the definition of 'business' as these activities are in connection with or incidental or ancillary to the principal activity of the taxpayer as explained above. 5.1.3 Whether there is supply of canteen services and transportation services from the Applicant to the employees (1) Fundamentally, the subject issue pertains to the transaction between the Applicant and employees, i.e., with respect to the canteen services and transportation services (herein after both services are referred as 'these services') as being supplied by the Applicant to employees for a consideration, although at subsidized rates. The Applicant pays the total consideration for the supply of these services to the canteen service provider and transport bus provider respectively and the Applicant in turn supplies these services to their employ....
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....er and the employee are liable for GST? 1. Schedule III to the CGST Act provides that "services by employee to the employer in the course of or in relation to his employment" will not be considered as supple of goods or services and hence GST is not applicable on services rendered by employee to employer provided they are in the course of or in relation to employment. 2. 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. Thus, it is derived from Entry 1 of Schedule III that "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 Entry 1 of Schedule III basically deals with 'services by an empl....
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....C 287 Mad]. M/s Thirumagal Mills Ltd. is a spinning mill manufacturing cotton yarn. The issue relates to taxation of a fair price shop run by the assessee for the benefit of its employees. This case pertains to the interpretation of provisions of the Madras General Sales Tax Act, 1959. Under the said Act, liability to pay tax was upon the 'dealer'. The Tribunal held that the assessee is not a dealer in respect of the turnover related to fair price shop. Hon'ble High Court confirmed this decision holding that the assessee is not dealer with reference to the transactions of fair price shop. The facts and the provisions of the law for which the said decision was pronounced are completely different than the current case. The Applicant further relies on the decision in case of Panacea Biotech Limited vs. Commissioner of Trade and Taxes [(2013) 59 VST 524 (Del.)]. This judgment is in respect of the provisions of Delhi Sales Tax Act, 1975, wherein taxability mainly depended upon whether the person is 'dealer' as per the provisions of the said Act. In the said case when the cars were purchased, they were taxable at the first point i.e. w.e.f. 29.03.1996 to 02.09.2001, therefore, purchases ....
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.... supply of services. Hence, as discussed in Para 5.1.2 and 5.1.3, Applicant's activity of supply of canteen and transportation services falls u/s 7 (1) of CGST Act, 2017. As discussed in Para 5.1.4, only the perquisites i.e., free supplies, in terms of a contractual agreement between the employer and employee are not to be subjected to GST as these are in lieu of the services provided by employee to the employer in relation to his employment. Hence, the recoveries made from the employees are liable to levy of tax as it is consideration against canteen services and transportation services provided by the Applicant to the employees. 5.2 Whether the Applicant would be exempted under the S1. No. 15 of Notification No. 12/2017-Central Tax (Rate) 5.2.1 The Applicant has submitted that they have agreement with M/s. Supreme Facility Management Ltd. for providing non-air-conditioned buses along with the drivers. M/s. Supreme Facility Management Ltd. has raised tax invoices to the Applicant charging 12% GST to the Applicant under SAC 9966. Applicant has further used these buses for providing transport services to its employees. 5.2.2 The applicant submits that the services of employ....
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....and includes- (i) a maxicab; and (ii) a motor-cab notwithstanding that separate fures are charged for its passengers;" As per the above definition, Regional Transport Authority imposes certain conditions on the contract carriage permit holder for carrying contract carriage. Section 74 of the Motor Vehicles Act, 1988 which is relevant the contract carriage is produced as below. 74. Grant of contract carriage permit. - (1) Subject to the provisions of sub-section (3), a Regional Transport Authority may, on an application made to it under section 73, grant a contract carriage permit in accordance with the application or with such modifications as it deems fit or refuse to grant such a permit: Provided that no such permit shall be granted in respect of any area not specified in the application. (2) The Regional Transport Authority, if it decides to grant a contract carriage permit, may subject to any rules that may be made under this Act, attach to the permit any one or more of the following conditions, namely: - (i) that the vehicles shall be used only in a specified area or on a specified route or routes; (ii)....
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.... case, holder of a permit does not have any privity of contract with the passengers i.e. employees of the Applicant. Applicant has rented the buses from M/s. Supreme Facility Management Ltd. This transaction is in the nature of rent -a-cab service. M/s. Supreme Facility Management Ltd. is charging his services of providing transport buses for carrying the employees @12% (6% SGST and 6% CGST). These invoices are raised to M/s. Lear Automotive India Pvt. Ltd. These services are in the nature of renting of services of transport vehicles with operators. Here, the transport service provider provides buses to M/s. Lear Automotive India Pvt. Ltd. and charges them on monthly basis fixed amount plus 12% GST under SAC 9966. Cost of fuel is included in these charges and the buses provided are along with the drivers. It is for M/s. Lear Automotive India Pvt. Ltd. to decide as to how these buses are to be used. Thus, these services squarely fall under SAC 9966 as rented services of transport vehicles. In case of MAH AAR-M/s. Shailesh Ramsundar Pande and RAJ AAR in case of M/s. Pawan Putra travels, the services provided by the transport service providers to the companies or organization for tran....
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....d 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." 5.3.3 As per Section 17 (5) of the CGST Act, ITC on food and beverages, outdoor catering, etc is not available. However, it is 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. We observe that that Circular No. 17....
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....n 17 of the CGST Act is applicable to the whole of clause (b) of sub-section (5) of section 17 of the CGST Act. 5.3.4 The Applicant has submitted that they are a manufacturing unit and that there are more than 250 workers in the factory and in accordance with Section 46 of the Factories Act, 1948, it is obligatory on them to provide canteen facilities within the factory premises. Thus, in light of the above-mentioned provisions, the ITC of the GST paid in relation to canteen charges is not blocked under u/s 17 (5) (b). However, the issue of eligibility of input tax credit needs to be examined further in the light of the facts of the present case and various Tax Notifications. 5.3.5 As per the provisions of the Factories Act, 1948, the Applicant has the legal responsibility to provide & maintain the canteen. The Applicant has accordingly, instead of maintaining the canteen himself, has engaged another person, Canteen Contractor, who is providing canteen services to the workers of the Applicant on behalf of the said Applicant. The service so provided is classifiable as "Restaurant Service" and liable to tax. The Restaurant Service attracts 5% of GST in terms of entry no.7 (ii) ....
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....Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 as amended vide Notification No. 20/2019-C.T. (Rate) dated 30.09.2019. 5.3.9 There is another way of looking at the transactions, that, had the Applicant not engaged any Canteen Contractor but decided to run the canteen himself, as mandated in the Factories Act, 1948, then also he would be required to pay 5% GST on taxable supply without availment of any ITC in terms of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 supra. 'Therefore, just by engaging, a Canteen Contractor, he can't be allowed to adopt an interpretation for availing ITC which is not available to him in a case of direct supply of Service. 5.4 Whether ITC is available to the Applicant on GST charged by the Transport Service Providers for providing the non-air-conditioned bus transportation services. 5.4.1 The services of bus transportation by the employer to his employee provided as perquisite in terms of contractual agreement entered into between the employer and his employees are in lieu of the services provided by employees to the employer in relation to their employment and will not be subjected to GST. 5.4.2 The service provid....
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.... there was a statutory duty on the appellant to establish a canteen for its employees. Considering the effect of definition of "input service" after 01.04.2011 it was found that establishment of such canteen was primarily for personal use or consumption of the employees and after such amendment no cenvat credit could be availed. This view has been upheld by the Hon'ble Supreme Court while dismissing the Special Leave Petition on 18.11.2021 preferred by the said appellant. The facts of the present case also indicate that the facility of transportation provided by the appellant to its employees was merely in the nature of service for personal use or consumption of its employees." 5.4.5 It is pertinent to note that the Hon'ble High Court held its view on the nature of services, under contention between taxpayer and the department, notwithstanding that they are not explicitly categorized as service for personal use or consumption of its employees under the provisions of the existing laws. Thus, we find that the ratio of court judgment is applicable in the current taxation regime and particularly to the current issue contended by the taxpayer. 5.4.6 Hired motor vehicles would be u....
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.... paras above). Consideration is absent or nominal. As per Section 7 (1) (c), 'the activities specified in Schedule I, made or agreed to be made without consideration' have been defined to be included in 'Supply Serial Number 2 of Schedule 1 reads as below. '2) Supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business: Provided that gifts not exceeding fifty thousand rupees in value in a financial year by an employer to an employee shall not be treated as supply of goods or services or both.'. Further, Explanation to Section 15 reads as below. Explanation, - For the purposes of this Act, -- (a) persons shall be deemed to be-related persons if -- (i) such persons are officers or directors of one another's businesses; (ii) such persons are legally recognised partners in business; (iii) such persons are employer and employee; As per 'a(iii)', employer and employee are deemed to be related persons for the purposes of this Act. This means any transaction between employer and employee will not come out of 'supply' for the ....