TaxTMI 
TaxTMI 
2025 (4) TMI 1049
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.... a. In case answer to above is yes, whether GST is applicable on the nominal amount to be deducted from the salaries of employees? b. Whether ITC is available to the Applicant on GST charged by the Canteen Service Providers for providing the catering services? Question 2: a. Whether the services by the way of non-air-conditioned bus transportation facility provided by the Transport Service Providers would be construed as 'supply of service' by the Applicant to its employees under the provisions of Section 7 of Central Goods and Service Tax Act, 2017 and Maharashtra Goods and Service Tax Act, 2017? b. Whether ITC is available to the Applicant on GST charged by the Transport Service Providers for providing the non-air-conditioned bus transportation services? 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 to the earlier, henceforth for the purposes of this Advan....
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....licant has engaged various food and transport service providers, who provide food and transportation facilities to the Applicant's employees. 1.3 It is with respect to the taxability of the amount paid to the vendors and the availability of ITC of the GST paid on such amount paid to the vendors, that the Applicant has filed the instant Application. 1.4 In order determine the taxability of the canteen and transportation facilities, it would be prudent to understand the nature of such facilities provided by the Applicant. The details of the existing arrangement are provided below. Provision of good facility by the applicant to its employees. 1.5 In the course of undertaking the manufacture of tyres, the Applicant, has in its employ about 1074 employees. Being registered under the Factories Act, 1948 (hereinafter referred to as 'Factories Act'), the Applicant is required to comply with all the obligations and responsibilities cast under the provisions of the Factories Act. 1.6 In this regard, we refer to Section 46 of the Factories Act which states that 'in any specified factory wherein more than 250 workers are ordinarily employed, a canteen or canteens, shall be provi....
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....avail the canteen facilities, employees have to punch their ID card in the canteen. All employees have to follow Canteen timings as per the rules. 1.10. Pursuant to the Canteen Policy, where employees avail of the canteen facility provided by the Applicant, 1/3rd cost of the cost of such canteen facilities to the Applicant will be deducted from the employee's salary, on a monthly basis. The balance monthly cost of the facilities is borne by the Applicant. The cost borne by the employee is deducted from the salary on a monthly basis which is also visible in the salary slip. 1.11 It is pertinent to note that the canteen facility provided to the employees at a nominal rate, is in the course of the employment of such persons with the Applicant and in pursuance to the statutory requirements under the Factories Act. Such facility would not be offered to any other person, but for the employer-employee relationship existing between the Applicant and its employees. Provision of bus transportation facility by the applicant to its employees 1.12 The factory of the Applicant is situated at a remote location in Pune, outside the city limits, where public transport is scare. This has....
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....s would also mean a reference to the same provisions under the MGST Act or Rules and vice versa. To examine whether the provision of food facilities by the Applicant to its employees, in pursuance of its statutory obligation under Section 46 of the Factories Act would be considered as 'supply of service' under Section 7 of the CGST Act, the Applicant seeks to rely upon the following legal interpretation of the CGST Act. Extension of concessional food facility to the applicant's employees is in the course of employer-employee relationship. 2.1.1 As submitted above, the Applicant offers food facilities to the employees of the Applicant at a pre-agreed nominal amount as per the Canteen Policy. The details of the food consumed and the details of the employee are maintained by the Company. Based on the record of the food consumed, the service provider raises an invoice on the Applicant. After the termination of employment services, the employees would not be allowed to access the canteen facilities of the Applicant. 2.1.2 The Applicant wishes to submit that the deduction of nominal amount for the provision of food facility would be taxable only if such amount qualifies as consi....
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....of services. One of the activities mentioned therein is reproduced below for ease of reference: (1) Services by an employee to the employer in the course of or in relation to his employment. 2.1.6 Schedule III read with Section 7 (2) of the CGST Act specifies that any services provided by an employee to the employer in the course of or in relation to his employment shall be neither a supply of goods nor supply of services. In short, any consideration by the employer to the employee, on account of the activities undertaken by the employee under the contract of employment will be out of the scope of levy of GST. 2.1.7 Applying the above to the Applicant's transaction, it emerges that the provision of the facility of canteen would squarely be covered under the ambit of the said Entry to Schedule-III since the canteen facilities are only provided to persons who are employees of the company i.e. in situations where an 'employer-employee' relationship exists. An employee would not be allowed to use the canteen facility once the employment ceases to exist. This makes it evident that an 'employer-employee' relationship is a mandatory, pre-requisite condition to avail the canteen f....
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....Applicants from their employees in the subject case.' 2.1.9 Drawing inference from the above, it is submitted that in order for a transaction to be subject to GST, such transaction would be required to qualify as a supply. However, an activity is undertaken in the course of an employment relationship, such activity would be outside the scope of GST and would not be subject to tax. 2.1.10 Further, the Applicant wishes to place reliance on the Circular No 172/04/2022-GST dated 6th July 2022, wherein it has been clarified that any benefit provided to the employees as part of employment contract would not be subjected to tax under GST. The relevant paragraph of the Circular is provided below: Q5. Whether various perquisites provided by the employer to its employees in terms of the contractual agreement entered into between the employer and the employee are liable to 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 supply of goods or services and hence GST is not applicable on services rendered by employee to employer provided they are in the cours....
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....ply within a meaning of CGST Act. - It should involve quid pro quo - viz., the supply transaction requires something in return of an equivalent value, which the person supplying will obtain, which may be in monetary terms/ in any other form (with the exception of transactions covered under the deeming provision as specified in Schedule I); and - The supply of goods or services or both shall be effected by a person in the course or furtherance of business. We have discussed each of the above-mentioned limbs in the ensuing paragraphs. The provision of canteen facility to the employees is only account of a statutory obligation and there is no legal intention to provide any service. 2.1.15 The Applicant wishes to reiterate the facts that they provide a demarcated space for canteen facility, as mandated under the provisions of the Factories Act, to its employees for consumption of food. To comply with this statutory obligation, the Applicant offers the canteen facility and has appointed the Canteen Service Providers to undertake the preparation of food and regular maintenance of the facility. 2.1.16 We wish to submit that there must be a l....
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....receipt of payment is not premised on the enforcement of reciprocal obligations between parties, it cannot be linked to a supply for the purpose of levying GST. Hence, it is submitted that the deduction of employees' salary towards the food availed by the employees, by the Applicant would constitute a transaction in money between the Applicant and its employees and would not attain a character of a 'consideration' in the absence of quid pro quo. 2.1.21 To substantiate this principle, the Applicant places reliance on the judgement of Bombay High Court in the case of Bai Mamubai Trust, Vithaldas Laxmidas Bhatia, Smt. Indu Vithaldas Bhatia vs. Suchitra. In the said case, the defendant was permitted to occupy the premises in question, on payment of royalty. It was contended that the royalty paid is consideration for the use of such premises and hence, should be subject to tax. It was held by the High Court that in order for a supply to subject to tax, it is essential that there is a supply by one person to another. It was further held that the royalty is payment towards damages for the violation of the plaintiff's right in the suit premises. Such payment lacks the essential quality ....
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....urtherance of his trade, profession or vocation; (h) [activities of a race club including by way of totalisator or a license to book maker or activities of a licensed 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." 2.1.5 Considering the nature of activities and transactions undertaken by the Applicant, it is abundantly clear that the activity under evaluation does not fall within the definition of business from Sr. No. (c) to (i) above. Thus, the various elements of the definition of business as provided in Sr. No. (a) above would need to be analyzed i.e. "any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity". 2.1.26 The Black Law's dictionary provides the below definitions for the activities in Sr no (a): i. Trade - "The business of buying and selling or bartering goods or services; A transaction or swap; A business or industry occupation; a craft or profession." ii. Commerce - "The exchange of goods and services, esp. on a large-scale involving tra....
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....of Indian Institute of Technology Vs. State of Uttar Pradesh & Ors. it was held that - (a) the statutory obligation of maintenance of a hostel which involved supply and sale of food was an integral part of the objects of the Institute; and (b) the running of the said hostel could not be treated as the principal activity of the Institute. Consequently, the Institute was held to not be doing business. 2.1.31 In view of the above, in the instant case, it is submitted that unless there is evidence of the fact that the Applicant had any intention of undertaking business and earning profit in relation to the provision of canteen facilities, and that the facility was merely provided in the course of a statutory obligation, the provision of such facility cannot be construed to be in the course of or in furtherance of its business operations. Therefore, such transaction cannot be construed as a supply under Section 7 of the CGST Act. 2.1.32 Moreover, it is submitted that various State Authority for Advance Ruling. including this Hon'ble Authority, have held that the provision of canteen facilities is not in course of business, but in the course of a statutory obligat....
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....e case of Tata Motors Ltd. 2.1.33 Further reliance has been placed in case of Posco India Pune Processing Center Private Limited, wherein the Applicant was paying the premium towards mediclaim taken for their employees and the parents of such employees. Against such payments made they were recovering 50% from their employees. The AAR Maharashtra held that 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 50% premium amounts by the applicant from their employees cannot be supply of services under the GST laws. 2.1.34 It is further stated that a similar ruling has been passed in case of In Re: M/s Jotun India Pvt Ltd by the Authority For Advance Ruling, Maharashtra, wherein it was held that the recovery of 50% of Parental Health Insurance Premium forms employees does not amount to "supply of service" under Section 7 of the CGST Act, as the Assessee was not in the business of providing insurance service. 2.1.35 Given the above submissions, it is submitted that the canteen fa....
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....ss. In this regard, the Applicant wishes to submit that the Canteen Service Provider provides the services to the Applicant in the form of preparation of food and maintenance of the canteen premises, for the Applicant's employees. Such services are provided in pursuance of the Applicant's obligation to provide such facilities to its employees, in the capacity of an 'occupier' of the factory under the Factories Act. 2.1.38 It is also crucial to refer to the provisions of Section 17 (5) (b) of the CGST Act, 2017, which provides for ITC which will not be available to an assessee. We have reproduced below the relevant portion of the said provision: "(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 clause (aa) except when used for the purposes specified therein, life insurance and health insurance: Provided 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 i....
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....2.2019. After the said substitution, the proviso after sub-clause (iii) of clause (b) of sub-section (5) of section 17 of the CGST Act provides as under: "Provided that the input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force." 2. The said amendment in sub-section (5) of section 17 of the CGST Act was made based on the recommendations of GST Council in its 28th meeting. The intent of the said amendment in sub-section (5) of section 17, as recommended by the GST Council in its 28th meeting, was made known to the trade and industry through the Press Note on Recommendations made during the 28th meeting of the GST Council, dated 21.07.2018. It had been clarified "that scope of input tax credit is being widened, and it would now be made available in respect of Goods or services which are obligatory for an employer to provide to its employees, under any law for the time being in force." 3. Accordingly, it is clarified that the proviso after sub-clause (iii) of clause (b) of sub-section (5) of section 17 of t....
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.... (37) STR 718 (Guj.). 2.1.43 Based on the aforementioned provisions and judicial precedents cited, there is no doubt that a taxpayer is allowed to avail ITC on procurement of foods or beverages when the same is made under any existing and enforceable law. Further, the Applicant has discussed in para 2.39 above the statutory obligation cast upon it under the Section 46 of the Factories Act, to provide canteen facility to its employees. 2.1.44 Considering the above, it is stated that the Applicant is allowed to avail input tax credit on the GST charged by the Canteen Service Provider as it is under a legal requirement. 2.2 Question No. 2. a. Whether the services by the way of non-air-conditioned bus transportation facility provided by the Transport Service Providers would be construed as 'supply of service" by the Applicant to its employees under the provisions of Section 7 of Central Goods and Service Tax Act, 2017 and Maharashtra Goods and Service Tax Act, 2017? b. Whether ITC is available to the Applicant on GST charged by the Transport Service Providers for providing the non-air-conditioned bus transportation services? To analyse whether arranging th....
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....cility. 2.2.5 As mentioned above, as per Section 7 read with Schedule III of the CGST Act, the supply of services by an employee to an employer in the course of employment will neither be in the nature of a supply of goods or services, Given that the facility is provided only to employees and in pursuance of their relationship as employees of the Applicant, it is submitted that the transportation services squarely falls under Schedule III to the CGST Act and such facility will not be construed as a 'supply'. Therefore, the provision of such facility will not be subject to GST. 2.2.6 This view is substantiated with reference to the ruling issued by this Hon'ble Authority in case of Tata Motors Limited, wherein the taxability of bus transportation facility offered by the Tata Motors Ltd. was being evaluated. In this regard, it was held that since the Applicant (i.e. Tata Motors) had not been supplying any services to its employees, in view of the provisions of Schedule-III, GST was not applicable on the nominal amounts recovered by the said Applicant from its employees for providing transportation facilities (with the same being applicable to canteen facility). It was further o....
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....iders, without any commercial objective. Drawing inference from the above submissions, it can be said that if there is no reciprocity of any activity or transaction i.e. when there is no express or implied reciprocity, between the Applicant and the employees, there can be no question of taxability of such transactions. Thus, in the instant case, the absence of an identifiable supply in the case of the provision of a transportation facility to the employees, the activity would not constitute 'consideration' for any supply. The supply should be effected in the course or furtherance of business under the CGST Act 2.2.9 The Applicant submits that it is engaged in the business of manufacture and sale of radial tyres, tubeless tyres, steel radial tyres and other automobile tyres and tubes - which is the Applicant's main business activity in accordance with the definition of business as provided in Section 2 (17) of the CGST Act. 2.2.10 In this regard, it is submitted that the provision of transportation facility is not in the nature of or in the course of business. In this regard, we refer to the submissions made in paragraphs 2.23 to 2.30 above. 2.2.11 In the instant case, t....
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...., and therefore, should not be subject to GST. THE APPLICANT IS ELIGIBLE TO AVAIL INPUT TAX CREDIT OF THE GST CHARGED BY THE TRANSPORT SERVICE PROVIDER 2.2.16 In order to determine whether the Applicant is eligible to avail ITC on the GST charged by the Transportation Service Provider, it is pertinent to refer to Section 16 (1) of the CGST Act. The relevant extract of Section 16 of the CGST Act, 2017 is reproduced below: (1) Every registered person shall, subject to such conditions and restrictions 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. 2.2.17 Based on a plain reading of the CGST Act, credit of input tax charged on supply of services would only be allowed when such goods or services or both are used or intended to be used in the course or furtherance of business. In this regard, the Applicant wishes to submit that the Transport Service Provider provides the services to the Ap....
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....question was answered by this Hon'ble AAR is reproduced below: Question:- 1. Whether input tax credit (ITC) is available to Applicant on GST charged by service provider on hiring of bus/motor vehicle having seating capacity of more than thirteen person for transportation of employees to & from workplace? Answer:- ITC is available to the applicant but only after 01.02.2019. 2.2.22 Based on the aforementioned provisions and judicial precedents cited, there is no doubt that a taxpayer is allowed to avail ITC on the procurement of services of transportation of passengers by a non-airconditioned bus for passengers exceeding 13 passengers. 2.2.23 Considering the above provision and facts of the case, it is submitted that the Applicant is allowed to avail ITC on the GST charged by the Transport Service Provider. 2.2.24 In this regard, we refer to the order passed by Authority for Advance Ruling Uttar Pradesh in case of Dr Willmar Schwabe (I) Private Limited wherein it was held that the applicant was specifically using motor vehicles having approved seating capacity of more than thirteen persons (including the driver) would be eligible for Input tax after 01.02.2....
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....t, 2017? Taxability of "canteen facility' provided to employees: At the outset taxability of 'Canteen Facility' need to be determined which can be analysed through the Charging section of the statue i.e. Section 9 of the CGST Act 2017 read with Section 7 of the CGST Act 2017 i.e. scope of supply, which lays two important tests discussed hereunder: 1. Test 1: Whether 'Canteen Facility's provided by employer to employee is in course or furtherance of business? Analysis: The phrase in course or furtherance of business is a very vide term and has not been defined in the CGST Act 2017. But the word business has been defined under Section 2 (17) of CGST Act, 2017 which within its scope almost every commercial activity. The definition starts with the words "Business includes" i.e. it is an open-ended definition and not an exhaustive which covers any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity. Further, clause (b) of Sec 2 (17) widens the scope by covering any activity which is incidental or ancillary to business is also business. On these footings we may say that 'Canteen Facility's provided by employer to its ....
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....ould be taxable under GST. It is pertinent to note that the view taken by AAR Haryana (Bewmer India Private Limited [2020 VIL 316 AAR] by AAR-Haryana dated 29 October 2020 conforms to the ruling issued in the matter of Caltech Polymers Private Limited [2018 (12) G.S.T.L. 350 (A.A.R. - GST)] which has been affirmed by the Appellate Authority for Advance Ruling [2018 (18) G.S.T.L. 373 (App. A.A.R. - GST)], wherein it was held that recovery of amount from employees for the canteen services provided by the company would be considered as outward supply and GST will be applicable on the same. The Caltech case (supra) has been upheld by Hon'ble AAAR, Kerala /Case No. CT/7726/2018-C3 dated September 25, 2018]. Reference Case law: Karnataka AAR in the case of M/s Federal Mogul Goetze India Ltd. Dtd. 29.11.2022. the gist of the judgment is reproduce below:- "The subsidized deduction made by the applicant from the employees who are availing food in the factory, would be considered towards ""Supply" of canteen service by the applicant under the provision s of Section 7 of the CGST/KGST Act 2017. GST is liable to be paid by the applicant on the value of the said supply to be d....
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....deration by a person in the course or furtherance of business; b. the activities specified in Schedule I, made or agreed to be made without a consideration; and c. the activities to be treated as supply of goods or supply of services as referred to in Schedule II. SCHEDULE I given under Section 7 of the CGST Act, 2017 declares supply of goods or services or both between related persons when made in the course of furtherance of business as "Supply". As per Explanation provided under Sub-section (5) (a) (iii) of Sec. 15 of the CGST Act, 2017, employer and employee are related persons. In view of above legal positions, the act of the assessee to provide Conveyance/Rent-a-Cab services to its employees will be treated as "Supply'. I. To decide value of supply: A) As per section 15 (1) value of supply shall be transaction value when Supplier and Recipient are not related person. However as per explanation to section 15 (5) (a) (iii), Employer and Employee are related person. B) As per section 15 (4), when the value can not be determined under section 15 (1), then the same shall be determined as prescribed and the same has been prescribed in....
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....18, input tax credit shall not be available in respect of the following. namely: - (a) motor vehicles and other conveyances except when they are used (i) for making the following taxable supplies, namely: - (A) further supply of such vehicles or conveyances; or (B) transportation of passengers; or (C) imparting training on driving, flying, navigating such vehicles or conveyances; (ii) for transportation of goods; (b) ....... B): Therefore, the taxpayer is eligible to avail ITC on inward Supply of "Rent-a-Cab services CH 9964" since they are providing Outward Supply as "Conveyance/Rent- a-Cab services". C): As per section 15 (1) value of supply shall be transaction value when Supplier and Recipient are not related person. However as per explanation to section 15 (5) (a) (iii), Employer and Employee are related person. D): As per section 15 (4), when the value cannot be determined under section 15 (1), then the same shall be determined as prescribed and the same has been prescribed in CGST Rules 2017. E) As per Rule 28 of CGST Rules 2017, value in relation to transactions between related person shall be, eithe....
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.... employees towards the food served in the canteen maintained by the applicant through third-party service provider, as mandated in the Factories Act, 1948 would attract tax under GST. (1) The Applicant is a Company incorporated under the provisions of the Companies Act, 1956. It is involved in the business of manufacture and sale of radial tyres, tubeless tyres, steel radial tyres and other automobile tyres and tubes. The Applicant has a factory in the state of Maharashtra where the aforementioned goods are manufactured and approximately 1074 full-time permanent and contractual workforce are employed. The Applicant has entered into a contractual relationship with Sodexo India Services Private Limited (hereinafter referred to as 'the Canteen Service Provider') for the supply of food to its employees within the Applicant's factory premises. (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) As per the employment contract, the employees of the Applicant are eligible for all the benefits and allowances according to the ....
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....sive 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 is for a pecuniary benefit' widens the scope of business to include non-profit activities. Clause (b) mentions that any activity or transactions in connection with or incidental or ancillary to activities mentioned in (a) would also be included in 'business'. Clause '(c)' provides that there would not be requirement of volume, frequency, or regularity of such transactions. (2) It is an accepted fact that the Applicant is not carrying out supply of canteen services as his principal activity. No doubt his principal activity remains as manufacture and supply of tyres which is covered by clause 'a' of above definition. Let's see whether the activity of supply of canteen services, falls under the definition of business, as extracted above. Clause (b) mentions that any activity or transaction incident....
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....mployees, i.e., with respect to the canteen services being supplied by the Applicant to employees for a consideration, although at subsidized rates. The Applicant pays the total consideration for the supply of canteen services to the canteen service provider and the Applicant in turn supplies the canteen services to their employees. (2) It is an undisputed fact that the money consideration charged, although at subsidized prices, for the supply of canteen services to their employees is being collected by the Applicant. (3) Therefore, it is evident on record that there are two distinct and totally different transactions in the event of supply of canteen services to the employees of the Applicant. They are: - i) Supply of canteen services by the canteen service provider to the Applicant (employer); and ii) Supply of canteen services by the Applicant (employer) canteen to their employees. (4) In respect of the first transaction, the canteen service provider has been supplying food/beverage to the Applicant (employer) for which the canteen service provider receives consideration from the Applicant on which the Applicant has been paying GST at....
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....;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 Schedule III basically deals with 'services by an employee to employer', and not the other way round. Only as a corollary, the 'services by the employer to the employee', especially when provided in the form of perquisites, has been discussed in the CBIC Circular No. 172/04/2022-GST dated 06.07.2022 in its para 2 mentioned above. From the above, it could be inferred that perquisites in terms of a contractual agreement between the employer and employee are not to be subjected to GST. (2) It may be seen that in order to place any service provided by the employer to employee outside the ambit of GST, the same should be in the form of a perquisite. Though the term 'perquisite' has not been defined under the provisions of GST, the same is discussed under the Income Tax Act, where it has been stated in Section 17 (2) as follows: - "perquisite" includes-....
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.... of this transaction cannot be altered by saying the said transaction was undertaken as a statutory obligation. The activities ancillary and incidental to principal business which are not for pecuniary gain are also covered under the definition of 'business' as provided in the Act. (2) The applicant submits that there should be an element of reciprocity for an activity to be subject to GST. The Applicant has argued that the deduction of employees' salary towards the food availed by the employees, would constitute a transaction in money between the Applicant and its employees and would not attain a character of a consideration' in the absence of quid pro quo. We find that there is clear reciprocity between the employees and the Applicant regarding provision of canteen services. By the Applicant's own submission, the subsidized canteen facility is provided as a part of the employment agreement. This agreement stipulates how much charges are to be recovered from the employees for providing canteen facility. Clearly, canteen services are provided by the employer and deduction of an amount from employees' salary is the consideration for the same. There is no substance in calling this....
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....thority shall be binding only on the applicant who had sought it, and the concerned officer or the jurisdictional officer in respect of the applicant. Further, this authority has placed reliance on Rulings in case of Himachal Pradesh AAAR dated 26.09.2023 in case of M/s Federal-Mogul Anand Bearings India Limited, Tamil Nadu AAAR dated 05.05.2023 in case of M/s Kothari Sugars and Chemicals Limited and Tamil Nadu AAR dated 20.12.2023 in case of M/s Faiveley Transport Rail Technologies India Private Limited. (5) If incidental of ancillary supply of goods or services such as canteen services by the employer to employee were to not fall under 'business', it would not be necessary to provide respite to 'supplies by employer to employees given as perquisite' from falling under 'supply' by taking recourse to schedule III. That is, if a transaction or activity is not a supply u/s 7 (1) of CGST Act, then there would not be necessity to place such a transaction u/s 7 (2)(a) for deeming it to be neither supply of goods nor supply of services. Hence, as discussed in Para 5.1.2 and 5.1.3, Applicant's activity of supply of canteen services falls u/s 7 (1) of CGST Act, 2017. As discussed in Par....
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....) 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. 172/04/2022-GST dated 06.07.2022 has been issued, by the CBIC, wherein clarifications on various issue pertaining to GST have been provided. In the above Circular, at Sr. No.3 of Para 2, clarification has been provided on the issue as to whether the proviso at the end of clause (b) of Section 17 (5) of CGST Act is applicable to the entire clause (b) or only to sub-clause (iii) of clause (b). It has been clarified that vide the CGST (Amendment Act), 2018, clause (b) of Section 17 (5) was substituted with effect from 01.02.2019 on the recommendation of GST Council's 28th meeting and accordingly, the proviso after sub-clause (iii) of Section 17 (5) (o) of CGST Act, is applicable to whole clause (b) of Section 17 (5). The relevant portion of above clarification is reproduced below: Clarification on various issues of section 17(5) of the CGST Act 3. Whether the ....
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....s 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 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) of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 which was amended by the Notification No. 20/2019-C.T. (Rate) dated 30.09.2019, effective from 01.10.2019. 5.2.6 From the facts of the case, it is clear that Canteen Contractor is providing 'Restaurant Service' to the Applicant which is chargeable to GST @ 5% rate in terms of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, as amended, without availment of ITC. Under explanation to the aforesaid entry, it has been clarified that the concessional rate is mandatory rate and availing the normal rate of tax will not apply and that is the reason the amended Notification No. 20/2019-C.T. (Rate) dated 30.09.2019 has been issued exercising power under S....
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....by the way of non-air-conditioned bus transportation facility provided by the Applicant to its employees would be construed as 'supply of service' under GST 5.3.1 We observe that the Applicant has engaged third-party Transport Service Providers to provide transportation facility to its employees for commuting between the factory and residence in non-air-conditioned buses. Applicant states that they do not recover any amount from the employees for this transportation facility. As per the Company policy such bus transportation facility is offered only to employees of the company. 5.3.2 In this regard, it may be seen that entry 1 of Schedule III of the CGST Act, 2017, provides 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 Schedule III basically deals with 'services by an employee to employer', and not the other way round. Only as a corollary, the 'services by the employer to the employee', especially when provided in the form of perquisites, has been discussed in the CBIC Circular No. 172/04/2022-GST dated 06.07.2022 wherein it has been explained as ....
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....upply of transportation services to the employees would in normal course constitute to be the supply of services u/s 7 (1) of GST Act 2017. However, it is now clarified by the CBIC circular No. 172/04/2022/GST dated 6th July 2022 that perquisite provided to the employees in view of the Contractual Agreement would not be subjected to GST. It is clarified that such perquisite are in lieu of the services provided by the employees to the employer in the course of or in relation to his employment, and should not be subjected to GST. Supplies of any services would not be subjected to GST only under the following circumstances. 1. Such services are exempt under the notification number 12/2017, CT(R) dated 28/06/2017. 2. Such a transaction in services is a non-GST supply. 3. Such services are not supply as per provisions in section 7 of CGST Act, 2017 As the supply of transportation service in the nature of perquisite by the employer to the employee would not have respite from two aspects mentioned at Sr.No.1 and 2 above as the said supply is neither exempted nor a Non-GST supply. Hence, it needs to be analysed if such services can be called as supply u/s 7....
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....ractual agreement are in lieu of services given by the employee to the employer and would not be subjected to GST by deeming it to be part of Schedule III as a corollary to entry at Sr.No.1 of Schedule III for cohesive interpretation. In view of this, supply of free transportation service provided by the employer to the employee in view of contractual agreement with them will not be 'supply' u/s 7 of MGST ACT. 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 perquisite of free bus transportation by the employer to his employee in terms of contractual agreement entered into between the employer and his employee is in lieu of the services provided by employee to the employer in relation to his employment and will not be subjected to GST. 5.4.2 The service provider of transportation service to the Applicant is discharging GST on the said services. To substantiate this, the Applicant has also attached few GST bills of independent service provider for reference. It is seen that ITC on leasing, renting or hiring of motor vehicles for transportation of passen....
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....at 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 have been used by the applicant for provision of service of transportation of employees from residence to factory or office premises. As seen in paras 5.3.1 to 5.3.4, free transportation....