AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (4) TMI 1096
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....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 Provider for providing the catering services? Question 2: Whether the deduction of nominal amount by the Applicant from the salary of the employees who will be availing the non-air-conditioned bus transportation facility proposed to be provided by the prospective Transport Service Provider will be construed as 'supply of service' by the Applicant under the provisions of Section 7 of Central Goods and Service Tax Act, 2017 and Maharashtra Goods and Service Tax Act, 2017? 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 will be available to the Applicant on GST that would be charged by the Transport Service Provider 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 the MGST Act are the same except for certain provisions. Therefore, unless a mention is ....
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....r to mean 'a person employed directly or by or through any agency (including a contractor) with or without the knowledge of the principal employer whether for remuneration or not in any manufacturing process, or in cleaning any part of the machinery or premises used for a manufacturing process, or in any other kind of work incidental to, or connected with the manufacturing process, or the subject of the manufacturing process but does not include any member of the armed forces of the Union'. Further, we refer to Section 2 (n) of the Factories Act which defines the term 'occupier' of a factory to mean the person who has ultimate control over the affairs of the factory'. 1.7 In the present case, given that the Applicant has employed more than 250 workers at its factory premises, the provisions relating to the maintenance and provision of canteen facilities for the use of the workers, would be applicable to the Applicant. Moreover, as the Applicant has ultimate control over the affairs of the factory, the Applicant would be considered as an 'Occupier' for the purpose of the Factories Act. Therefore, the Applicant has set up a canteen facility, having a separately demarcated area in ....
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....employment of such persons with the Applicant and in pursuance to the statutory requirements under the Factories Act. PROVISION OF THE PROPOSED 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 a direct impact on continuity of operations of the factory, and the convenience and safety of employees to reach/ leave the factory. Accordingly, in order to carry out its business without any disruption and for efficient functioning of the business as a whole, the Applicant proposes to engage contractual service provider to provide transportation services for its employees. 1.13 In this regard, the Applicant wishes to enter into a contract with a Transport Service Provider to provide transportation facility to its employees between the factory premises and the residence, in non-air-conditioned buses having seating capacity of more than 13 persons. 1.14 As per the policy of the Applicant, the proposed bus transportation facility will be offered to the employees working at the middle and lower level management. In order to avail....
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....T'S EMPLOYEES IS IN THE COURSE OF EMPLOYER - EMPLOYEE RELATIONSHIP 2.1 The Applicant offers food facilities to its employees at a pre-agreed nominal amount as per the Canteen Policy. The service provider raises an invoice on the Applicant on monthly basis. After the termination of employment services, the employees would not be allowed to access the canteen facilities of the Applicant. 2.2 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 consideration towards a supply' as defined under Section 7 of the CGST Act. In this regard, the Applicant places its reliance upon the interpretation of the following legal provisions. 2.3 Section 9 (1) of the CGST Act provides that the Central Goods and Service Tax will be levied on all intra state supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 of the CGST Act. 2.4 Basis the above, it is amply clear that in order for GST to be levied on any activity, such activity is required to qualify as a 'supply' in the first place. To evaluate whethe....
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..... 2.7 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 facility. 2.8 Reliance in this regard is placed on 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. It was further observed that the Applicant, in its capacity of being the employer....
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....ar 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 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.' 2.11 In the instant case, it is submitted that the Applicant provides the canteen facility in terms of the con....
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....l intention to provide any service. 2.15 The Applicant submits that there is no legal intention to enter into any contractual relationship by the Applicant and the provision of canteen facility to the employees is only due to mandatory statutory obligation. 2.16 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 a Canteen Service Provider to undertake the preparation of food and regular maintenance of the facility. 2.17 In the instant case, the Applicant has set up the canteen facility on account of a statutory obligation imposed by the Factories Act on the Applicant in its capacity as the 'occupier' of the factory. This obligation is complied through the Canteen Service Provider appointed by the Applicant. There should be an element of reciprocity for an activity to be subject to GST 2.18 As per Section 7 of the CGST Act, an activity could be considered as a supply only if it is 'made or agreed to be made' for a considera....
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....rt 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 of reciprocity to make it a supply and hence, will not be subject to tax. 2.22 In the instant case, the Applicant deducts a nominal amount from the employees' salary towards the cost of services availed by them from the Canteen Service Providers without any commercial objective. Drawing inference from the above, it can be said that if there is no reciprocity of any activity or transaction i.e. when is no express or implied reciprocity i.e. quid-pro-quo, 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 canteen 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 2.23 In order to qualify as a 'supply' as mentioned in Se....
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....o (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 transportation between cities, states, and nations." iii. Manufacture - "A thing that is made or built by a human being (or by a machine), as distinguished from something that is a product of nature. Manufacturers are one of the statutory categories of inventions that can be patented. Examples of manufactures are chairs and tires." iv. Profession "A vocation requiring advanced education and training. Collectively, the members of such vocation." v. Vocation - "A person's regular calling or business; one's occupation or profession." vi. Adventure - "A commercial undertaking that has an element of risk; a venture. Cf. Joint venture; A Voyage involving financial and insurable risk, as to a shipment of goods." vii Wager - "Money or other consideration risked on an uncertain event; a bet or gamble. A promise to pay money or other consideration on the occurrence of an uncertain eve....
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.... 7 of the CGST Act. 2.32 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 obligation and hence, does not qualify as a supply under Section 7 of the CGST Act: i. In the case of Emcure Pharmaceuticals Ltd., this Hon'ble Authority held that the provision of canteen facilities is not in the course of business and hence, should not be construed as a 'supply' under Section 7 of the CGST Act. Therefore, any recovery on account of the canteen facility should not be subject to tax. The relevant extract is provided below, for ease of reference: 'The provision of canteen facility is a welfare measure, also mandated by the Factories Act and is not at all connected to the functioning of their business of developing, manufacturing, and marketing pharmaceutical products. Further, the said activity is not a factor which will take the applicant's business activity forward. We also find the applicant is not supplying any canteen service to its employees in the instant case. Further, the sai....
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....remium from 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. 2.35 Also, reliance has been placed in case of Ms. Zydus Lifesciences Ltd. (Formerly known as Cadila Healthcare Limited.), wherein the Authority for Advance Ruling, Gujarat held that the provision of canteen facilities is not in the course of business and hence, should not be construed as a 'supply' under Section 7 of the CGST Act. Therefore, any recovery on account of the canteen facility should not be subject to tax. The relevant extract is provided below, for ease of reference: 'Subsidized deduction made by the Applicant from the employees who are availing food in the factory/corporate office would NOT be considered a supply under the provisions of Section 7 of Central Goods and Service Tax Act, 2017 and Gujarat Goods and Service Tax Act, 2017. The applicant is not liable to pay GST on the amount deducted/recovered from the employees. Further the applicant is recipient of canteen service to facilitate the employees and Canteen Service Provider raised the Bill of canteen charges inclusive of G....
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....the nature of a supply under Section 7 of the CGST Act, and therefore, is outside the scope of GST and would not be subject to tax, on account of the following: • The canteen facility is provided in pursuance of a statutory obligation under the Factories Act; there is no supply of service being undertaken. • The canteen facility is provided to the employees in the course of their employment with the Applicant. As a result, such activity is excluded from the purview of supply as per Section 7 of the CGST Act read with Schedule III. • Notwithstanding the above, the canteen facility is not provided in the course or furtherance of business; there is no quid pro quo and no intention to undertake the business of providing canteen facilities. • Moreover, the recovery related to canteen made by Applicant from its employee is ultimately paid to the third-party vendor i.e. Sarathi Hospitality Industrial Services. • This has been substantiated with reference to various Advance Rulings as provided above which indicates that the canteen facility is not in the nature of supply and therefore, should not be subject to tax. In view....
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....ply 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." 2.41 In this regard, we wish to reiterate the fact that the Applicant is engaged in the business of manufacture and sale of industrial trucks and supply chain management solutions and is registered under the provisions of Factories Act. As per Section 46 of the Factories Act, 'in any specified factory wherein more than 250 workers are ordinarily employed, a canteen or canteens, shall be provided and maintained by the 'Occupier' for the use of the workers.' In this regard, we refer to section 2 (1) of the Factories Act which defines the term 'worker' to mean 'a person employed directly or by or through any agency (including a contractor) with or without the knowledge of the pr....
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....8th 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 the CGST Act is applicable to the whole of clause (b) of sub-section (5) of gestion 17 of the CGST Act.' As submitted above, the Applicant provides the canteen facility to its employees in furtherance of its obligations under the Factories Act. Therefore, the Applicant wishes to submit that the restriction imposed under Section 17 (5) of the CGST Act, 2017 is not applicable in the instance case, since the canteen facility is extended to its employees as a part of its statutory obligations under the provisions of Factories Act. ....
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....ty would be considered as a 'supply of service' by the Applicant to the employees, we have relied on the following legal interpretation of the CGST Act. PROVISION OF PROPOSED TRANSPORT FACILITY THROUGH THE PROSPECTIVE TRANSPORT SERVICE PROVIDER AND SUBSEQUENT DEDUCTION OF NOMINAL COST WOULD NOT TANTAMOUNT TO 'SUPPLY' UNDER SECTION 7 OF THE CGST ACT "2.46 In the light of the above facts, it is pertinent to determine the GST implications on the provision of the proposed transport facility by the prospective Transport Service Provider to its employees. In this regard, the Applicant has completely placed its reliance upon the following interpretation of the legal provisions. 2.47 The Applicant has made submission regarding the legislative framework in relation to the concept of 'supply' in para 2.3 to 2.6 above, which will also be squarely applicable in the context of transportation services proposed to be provided to the Applicant's employees. In the context of whether the transportation facility proposed to be provided by the Applicant qualifies as a 'supply', the Applicant makes the following submissions. Transportation facility to be provided by the Applicant is the course....
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....licable 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 observed that the Applicant, in its capacity of being the employer was the recipient of the service and employees were the users of such services. This Hon'ble AAR held that by virtue of Clause 1 of Schedule-III to CGST Act 2017, GST was not applicable to the nominal amount recovered by the applicants from their employees. The relevant paragraph from the said Ruling is reproduced below for ease of reference: '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 28-6-2017 in respect of nominal amounts of recoveries made from their employees towards 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 ....
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....ovision of the proposed 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. 2.56 In the instant case, the Applicant proposes to collect nominal amount from the employees towards the provision of such transportation services. 2.57 Based on the above, it could be inferred the Applicant would not be supplying any services to its employees but is merely making a facility available to its employees in the course of their employment Further, it is submitted that unless there is evidence of the fact that the Applicant has any intention of undertaking business and earning profit in relation to the provision of such proposed facilities, the provision of such facility cannot be construed to be in the course of or in furtherance of its business operations. Therefore, such proposed transaction cannot be construed as a supply under Section 7 of the CGST Act. 2.58 We also refer to another ruling of this Hon'ble Authority, in the case of Integrated Decisions and Systems India Pvt. Ltd., where the applicant provided transportation facility to its employees and recovered a nominal a....
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....y Applicant from its employee will ultimately be paid to the third-party vendor. • This has been substantiated with reference to various Advance Rulings as provided above which indicates that the transport facility will not be in the nature of supply and therefore, should not be subject to tax. In view of the above, it is submitted that the provision of transport facility should not be subject to GST. THE APPLICANT WOULD BE ELIGIBLE TO AVAIL INPUT TAX CREDIT OF THE GST THAT WILL BE CHARGED BY THE PROSPECTIVE TRANSPORT SERVICE PROVIDER 2.61 In order to determine whether the Applicant would be eligible to avail ITC on the GST that would be charged by the prospective 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 a....
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....02.2019.' A copy of the advance ruling is enclosed with this application. 2.66 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. 2.67 Considering the above provision and facts of the case, it is submitted that the Applicant should be allowed to avail ITC on the GST that would be charged by the prospective Transport Service Provider. 2.68 In this regard, we refer to the order passed by Authority for Advance Ruling Uttar Pradesh in case of Dr Willmar Schwabe (1) 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 01.02.2019. The relevant portion of the said ruling is reproduced below: 'In the subject case, since the applicant has specifically submitted that they are using motor vehicles having approved seating capacity of more than thirteen persons (including the driver), the applicant shall be e....
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....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 the CGST Act is applicable to the whole of clause (b) of sub-section (5) of section 17 of the CGST Act. 5....
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....b clause (iii) of clause (b) of Section 17 (5) of the CGST Act,2017 is applicable to the whole of clause 17 (5) (b). 8. Hence this office is of opinion that ITC of GST charged by CSP will be available to the Applicant in respect of food and beverages as canteen facility is obligatorily to be provided under the Factories Act, 1948 as far as provision of canteen service for employees. 9 It is also submitted that the ITC on GST charged by the CSP will be restricted to the extent of cost borne by the Applicant only. 10. This office has relied on the decision of Hon. Gujrat Advance Ruling No GUJ/GAAR/R/2023/ 23 Dt. 19/06/2023 in case of M/s. Tata Autocomp Systems Ltd. B) TRANSPORTATION FACILITY: 1. The Applicant proposes to provide bus transportation facility to ensure the safety of their employees. In this regard, the Applicant wishes to enter into a contract with a vendor for the provisions of bus transportation facility to and from the factory to the employees. 2. This policy would be applicable to employees as specified in the company policy and pre-agreed nominal amount would be recovered from monthly salary of the employees who avail th....
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....of the design, manufacture and distribution of palletized material handling equipment including diesel forklift, electrical forklift and other warehousing equipment and having a manufacturing plant wherein more than 250 workers are employed. (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 Company's policy. Pursuant to the Canteen Policy, where employees avail the canteen facility provided by the Applicant, the Applicant would deduct INR 450 as cost of such canteen facilities from the salary of the employee on a monthly basis. The balance monthly cost of the canteen facilities is borne by the Applicant. (4) Applicant has contended that the canteen facility is provided in terms of the contractual agreement entered into between the employer and employee. The contractual agreement specifically provides for availment of benefits and allowances as per the Company's policy which apart from oth....
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....erial handling equipment including diesel forklift, electrical forklift and other warehousing equipment, 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 incidental or ancillary to principal activity would also be included in 'business'. The term 'incidental' has been defined in various dictionaries as under: Oxford Dictionary - the happening as part of something more important. Cambridge Dictionary - less important than the thing something is connected with or part of Dictionary.com - happening or likely to happen in an unplanned or subordinate conjunction with something else. Similarly word 'ancillary' has been defined as under: Oxford Dictionary - provide necessary support to the main work or activities of an organisation. - In addition to something else but not as important. Cambridge Dictionary: providing support or help. Dictionary.com - supporting, secondary, subsidiary The reading of all above definitions cla....
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.... ii) Supply of canteen services by the Applicant (employer) to their employees. (4) In respect of the first transaction, the canteen contractor has been supplying canteen services to the Applicant (employer) for which the canteen contractor receives a consideration from the Applicant; on which the Applicant has been paying GST at the applicable rates to the canteen contractor. (5) Similarly, in the second transaction, the Applicant (employer) is supplying the canteen services to their employees for which the Applicant is receiving consideration, although at the subsidized rate, from their employees. The canteen contractor invoices to the company for the entire canteen services. He charges the consideration along with GST thereon. There is no privity of contract between the canteen operator and the employees. It is the company which is providing canteen services to the employees. Company deducts certain amount from salary of the employees against this supply. Company makes only part of the recovery and balance cost is borne by the company. Hence, the criteria of 'Business', 'Consideration' are met in the transactions of supply of canteen services by applica....
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....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- (i) the value of rent-free accommodation provided to the assessee by his employer; (ii) the value of any concession in the matter of rent respecting any accommodation provided to the assessee by his employer; (iii) -------- (3) As per Income Tax Act, perquisite is defined to be the value of free benefit or facility given by the employer to the employees. The collection from the employees of whatever value, is not covered under 'perquisite'. It could be inferred from the above, that any service rendered free of charge, or, concession given for any service rendered on a concessional basis shall qualify as a perquisite. But, it is to be noted that only the value/portion to the extent of concession offered by the employer is to be treated as a perquisite and not the remaining portion/value that has been charged by the employer. Applying the said analogy to the instant case,....
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.... 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 transaction as a transaction in money and that there is no reciprocity. The intention of pecuniary gain is not necessary for the activity to be called as 'business' or 'supply'. The reliance placed on Hon'ble BHC Judgement of Bai Mamubai Trust is misplaced as the facts & issues are different. In that case, the issue was whether royalty payment made for remaining in possession of suit premises falls within the definition of supply. Hon'ble court observed that defendant's occupation pursuant to an order of the Court cannot be said to be contract involving a supply for consideration. In the applicant's case, Applicant is providing canteen services and in turn is receiving consideration though at subsidized rates. (3) Applicant has referred to decision of Cinemax India Ltd v/s. Union of India of Hon'ble Gujarat High Court. The fac....
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....e 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 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 provided by the Applicant to the employees. 5.2 Whether ITC of tax paid to caterer for Canteen Services is available 5.2.1 Now, coming to the other issue which is to be decided here is, whether input tax credit (ITC) is available to the Applicant on GST charged by the service provider on the canteen facility provided to employees working in the factory. 5.2.2 Before deliberating on this issue, it would be prudent to refer to the Se....
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....019 on the recommendation of GST Council's 28th meeting and accordingly, the proviso after sub-clause (iii) of Section 17 (5) (b) 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 proviso at the end of clause (b) of sub-section (5) of section 17 of the CGST Act is applicable to the entire clause (b) or the said proviso is applicable only to sub-clause (iii) of clause (b)? 1. Vide the Central Goods and Service Tax (Amendment Act) 2018, clause (b) of sub-section (5) of section 17 of the CGST Act was substituted with effect from 01.02.2019. After the said substitution, the proviso after 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 ....
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....rms 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 Section 16 (1) and Section 148 of the CGST Act, 2017, so as to come out of the provisions permitting availment of ITC. In other words, a Taxpayer providing Restaurant Service has no option of taking ITC and providing Restaurant Service at normal rate. 5.2.7 Accordingly, the canteen service provider is providing the restaurant service to the workers of the Applicant on behalf the said Applicant and paying Tax at specified rate of 5% in terms of the Notification ibid. The Applicant is also recipient of service when viewed in terms of definition of recipient of service, as defined in Section 2 (93) (a) of the CGST Act, 2017, which is reproduced below: - "(93) "recipient" of supply of goods or services or both, means - (a) where a consideration is payable for the supply of good....
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....ses having seating capacity of more than 13 persons. (3) As per the policy of the Applicant, the proposed bus transportation facility will be offered to the employees working at the middle and lower level management. In order to avail the bus transportation services, the employees would be required to display bus cards and employee IDs issued by the Applicant to board the bus and avail the bus facility. The prospective service provider will provide transportation services according to the pre-approved routes provided by the Applicant. (4) Pursuant to the Transport policy, a pre-agreed nominal amount as a cost of such transportation facility to the Applicant will be deducted from the employee's salary on a monthly basis availing the transportation facility. The balance monthly cost of the facilities will be borne by the Applicant. (5) Applicant has raised the question, whether the deduction of nominal amount by the Applicant from the salary of the employees who will be availing the non-air-conditioned bus transportation facility proposed to be provided by the prospective Transport Service Provider will be construed as 'supply of service' by the Applicant u....
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.... is discussed under the Income Tax Act, where it has been stated in Section 17 (2) as follows: "perquisite" includes (i) the value of rent-free accommodation provided to the assessee by his employer; (ii) the value of any concession in the matter of rent respecting any accommodation provided to the assessee by his employer;" (iii) ------------------" As per Income Tax Act, perquisite is defined to be the value of benefit given to the employees. This is the value of perquisite which is in lieu of the services of the employees which are not leviable to tax by the virtue of entry-1 of schedule III. The collection from the employees of whatever nominal value is not covered under 'perquisite' and is liable for levy of tax. It could be further inferred from the above, that any service rendered free of charge, shall qualify as a perquisite. We find that in the instant case, Applicant is offering the transportation facility at nominal value to its employees. Hence GST would be applicable on the recoveries made in respect of these services provided to the employees. 5.3.5 Taxpayer has taken similar arguments that were taken for taxation of recoverie....
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....ected 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 The supply of canteen and transportation services 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. The activity of provision of canteen and transportation services to the employees are in the course of business (as detailed in 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 se....
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....ovided by the employer as perquisite which is in the lieu of the services provided by employees to the employer. The entire balance value of the services for which no amount is charged is the perquisite provided by the employer to the employees. As this part is in lieu of services of the employees to the employer which fall under schedule 3, the perquisite part is not taxable, as a corollary, deeming it to be falling in the said entry of schedule 3. Hence, though the employer and employee are related parties, the value on which tax is a liable to be paid is only the recovered amount from the employee as the remaining part of the value is the perquisite provided by the employer which is not liable to tax as discussed above. 5.5 Whether ITC is available to the Applicant on GST charged by the Transport Service Providers for providing the non-air-conditioned bus transportation services. 5.5.1 The services of 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. 5.5.2 The....
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....e treated as "input service" since 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." 5.5.5 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. 5.5....