TaxTMI 
TaxTMI 
2025 (12) TMI 308
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....ice Provider-CSP) to operate canteen within the Applicant's premises and a specified percentage of the cost of the meals provided is deducted by the applicant from their employees' salaries and from the amount paid to/recovered from contractor providing contractual workers on a monthly basis. 4. The applicant has sought a ruling on the following questions: - (1) Whether subsidized deduction made by the applicant from the employees and workers towards canteen facility provided by the canteen service provider at the canteen facility would be considered as a 'supply' by the applicant under the provisions of Section 7 of the CGST Act, 2017 and GGST Act, 2017. (2) In case answer to above is yes, • Whether GST is payable on the amount recovered as deduction from the salaries of employees to worker contractors or an open market value? 5. The applicant has explained the nature of recovery of subsidized value as under: - SI.No. Type Mode of availing facility Basis of recovery Mode of recovery Book Treatment Payment of GST on outward supply 1 Full-time employees ID card On the basis of consumption Subsidized value deducted from sal....
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....ntractor) 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. 8. The term employee has not been defined under GST. Therefore, a reference is drawn from the Employee Fund & Miscellaneous Provisions Act, 1952 (EPF Act). Section 2(f) of EPF Act defines employee as any person who is employed for wages in any kind of work, manual or otherwise, in or in connection with the work of an establishment, and who gets his wages directly or indirectly from the employer, and includes any person- (i) employed by or through a contractor in or in connection with the work of the establishment; (ii) engaged as an apprentice, not being an apprentice engaged under the Apprentices Act, 1961 (52 of 1961), or under the standing orders of the establishment; On perusal of the above meaning of employee, the definition of employee under t....
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....role to determine the GST implication on provision of such a facility: - • There shall be a legal intention of both the parties to the contract to supply and receive the goods or services or both. The absence of such intention would not amount to supply within the meaning of CGST Act. • It should be quid pro-quo viz., the supply transaction requires something in return, which the person supplying will obtain, which may be monetary terms/ in any other form except in cases of deeming provisions as specified in Schedule I, and • The supply shall be effected by a person in the course or furtherance of business. 12. The provisions of canteen facility to the employees and workers is due to mandatory statutory obligation and to save time and efforts of approx. 560 number of employees and workers at the premises. The applicant is merely providing demarcated space for canteen facility as mandated under the provisions of the Factories Act to its employees and its workers. The supply is from the canteen Service provider to the employees and workers and not from the Canteen Service Providers to the applicant as the food gets consumed only by the employ....
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....fession, vocation, adventure and wager or any other similar activity. The applicant has reproduced the definitions of trade, commerce, manufacture, profession, vocation, adventure and wager from Black's law dictionary and submitted that the activity of providing canteen service does not fall under any of these terms. Reliance has also been placed on the case of Cinemax India Ltd. Vs UOI wherein the term 'furtherance of business' has been mentioned as an act of furthering, helping forward business, promotion of business, advancement of business or progress of business. Further, reliance was also placed on the Allahabad High Court judgement of Indian Institute of Technology Vs State of Uttar Pradesh to submit that canteen facility cannot be treated as an ancillary to the business activity. 16. The applicant further submits that as per Schedule-III of the CGST Act, service by an employee to the employer in the course of or in relation to his employment shall be treated as neither supply of goods nor supply of service. Further, CBIC Circular No. 172/04/2022-GST dtd. 06.07.2022 also provides that any perquisite provided by the employer to its employee in terms of contractual agreemen....
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....on is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the GGST Act. 19. We have considered the submissions made by the applicant in their application for advance ruling as well as the submissions made both oral and written during the course of personal hearing. We have also considered the issue involved, the relevant facts & the applicant's submission/interpretation of law in respect of question on which the advance ruling is sought. 20. We find that we are faced with two issues: - (i) whether the subsidized deduction made by the applicant from the employees, towards canteen facility provided by the canteen service provider at the canteen facility, would be considered as a 'supply' by the applicant under the provisions of Section 7 of the CGST Act, 2017 and GGST Act, 2017. (ii) whether the subsidized deduction made by the applicant from the contractual workers, towards canteen facility provided by the canteen service provider at the canteen facility, would be considered as a 'supply' by the applicant under the provisions of Section 7 of the CGST Act, 2017 and GGST Act, 2017....
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.... Service provider. Since, the facts in the applicant's case as well as that in the case of M/s Troikaa Pharmaceuticals Ltd. are identical, we would follow our ruling given in M/s Troikaa Pharmaceuticals Ltd. to the applicant's case as well. A feeble attempt has been made by the applicant to distinguish the ruling given in Troikaa Pharmaceuticals Ltd., on the applicability of GST on the amount representing the contractual worker portion of canteen charges, based on the facts of the case. However, having gone through the agreement made by the applicant with the service provider, who supplies the contractual workers, we do not find any significant difference in the term of the agreement with that of the agreement entered into by Troikaa Pharmaceuticals Ltd. with their service provider, which we will discuss in the subsequent paras. 23. The relevant paras of the ruling given in the case of M/s Troikaa Pharmaceuticals Ltd., on the applicability of GST on the amount representing the contractual worker portion of canteen charges, is reproduced below: - "Applicability of GST on the amount recovered by the M/s Troikaa Pharmaceuticals Limited, from contractual workers employed by....
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....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]; 18.3 The contractual worker in the factory are for carrying out the activity which are either directly or indirectly related to manufacturing activity. The contractual worker in the instant case, is under scope of definition of "Worker" stipulated under section 2(1) to be read with Section 46 of the Factories Act, 1948. 18.4 The term 'employed' is not defined under the GST, therefore, we refer to the dictionary meaning. The Law Lexicon says that the word 'employed' means engaged or occupied in the performance of work or hired to perform labour. Security Firm/ Contractor pays the salary to the contractual worker i.e. Security personal. These contractual workers are supplied by the contractor to M/s Troika for carrying out activity in the premises. ....
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....ds or services or both, whether by sale, transfer, barter, exchange, license, rental, lease or disposal or any other mode, made or agreed to be made by such person in the course or furtherance of business". 20. The term "business" is defined in section 2(17) of the CGST Act, which reads like this: "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 incidents or ancillary to sub-clause (a); From the plane reading of the definition of "business", it can be safely concluded that the supply of food by the applicant to its contractual worker would definitely come under clause (b) of section 2(17) as a transaction incidental or ancillary to the main business. As the contractual worker are working for the company to run the business activity of M/s Troikaa. 21. Schedule II to the CGST Act, 2017 describe the activities to be treated as supply of goods or supply of services. As per clause 6 of the Schedule, the following composite supply is declared as supply of s....
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....from contractual worker on account of third-party canteen services provided by M/s Troikaa would come under the definition of 'outward supply' as defined in Section 2(83) of the CGST Act, 2017 and therefore, liable to tax as a supply under GST." 24. The authority in the case of M/s Troikaa Pharmaceuticals Ltd., held that there wasn't employer - employee relationship reason behind that was allowance, leave encashment and provident fund was not paid by M/s Troikaa to contractual worker directly rather it was paid by the contractor. Here in the present case, we find that as per para. 3(b) as well as Schedule-II of the agreement, the gross bill raised by the contractor covers the Wages, ESI, PF, Bonus, Leave Salary as well as the service charge of the contractor. This service charge of the contractor is 9% of the Bill amount. Therefore, there is no difference in the manner of billing in the case of M/s Troikaa Pharmaceuticals Ltd. vis-à-vis the applicant. We find that the other terms of the agreement also do not convey any impression that there exists an employee-employer relationship between the applicant and the contractual workers. The relevant paras of the agreement, whic....
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....h education of minimum X pass and above, can read and write English and Gujarati and shall have minimum experience as stipulated by the Company. n) The Contractor or his workers will be allowed to work at the premises of the Company only for the discharge of their obligations hereunder and will have no right of unrestricted entry to any area other than defined and designated area allocated to them for the work and are to remain upon the premise of such designated area and will have to vacate the premises after completion of working hours or at any time at the instance of the Company. o) The Company will not, in any manner be responsible for any acts, omission or commission of the workers engaged by the Contractor and no direct or indirect claim in this respect shall lie against the Company. However, in the event of any such claim being made against the Company by any of the Contractor's worker or his heirs, successors or assignees which the Company is required or obliged to discharge, the Contractor hereby indemnify and keep the Company indemnified against all the expenses, loss, cost incurred to be incurred by the Company in that regard. p) The Contracto....
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....ke good to the Company, any damage, loss, fine penalty, payment, expenses including expenses for legal proceedings incurred or made by Company on account of the Contractor's failure or lapses in compliance with the above-mentioned laws or for any other reasons and the Company shall be entitled to deduct such amount payable to the Contractor. e) The Contractor will be responsible for any criminal act committed by its personnel deputed to the Company and the Contractor shall be responsible for expenses and contesting any criminal proceeding instituted against personnel of the Contractor. f) In case of any accident occurring during the performance of the services causing injury and/or any partial or permanent disablement to any personnel engaged for performance of services by the Contractor, it shall be the responsibilities of the Contractor to bear and make good all medical expenses and compensation in respect of the same. 7. COMPLIANCE WITH LEGISLATION a) The Contractor will be liable for due observation and implementation of all the statutory obligations under labour legislation and other enactments, whatsoever as applicable to the Contractor and the work....
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.... mature termination, the Contractor shall forthwith return all instruments etc. as may have been provided to him by the Company. c) The Contractor hereby indemnifies and keep the Company indemnified, at all the time, whether during the tenure of contract or three years after conclusion or termination of the Contract, against any loss, damages, expenses, cost, whether directly or indirectly, which is related or attributed or caused by any act of omission, commission, negligence, fraud, misfeasance, act of indiscipline, either on the part of the Contractor or any personnel deputed or engaged by the Contractor and that the Company. [Emphasis supplied] 25. As per the above terms of the agreement, we find that the complete responsibility of the contractual workers solely rests with the contractor. This we have arrived on the basis of the following clauses of the agreement:- (a) The applicant deals only with the Contractor and give instructions to him only and not to the contractual worker. (b) The applicant does not have, whether directly or indirectly, any control, supervision or the manner of the discharge, dismissal or retrenchment or reemployment of ....
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.... contributions and other dues in respect of their staff. (l) the Contractor will also extend benefits if applicable, under the below various Labour legislation Acts to their personnel working in the presence of the agreement. OR (m) The Contractor agrees to indemnify the applicant from any liability arising from the labour legislation if there is any responsibility cast by statutory authority or any court on the applicant on account of the failure on the part of the Contractor Therefore, we are unable to accept the applicant's contention that there exists an employee-employer relationship with the contractual workers. 26. The applicant has also relied upon the judgement of the Supreme court in the case of MMR Khan & Others Vs UOI-1990 AIR 937 to buttress their argument that contractual workers engaged through third-party agencies and availing canteen facilities under the applicant's supervision and control must be regarded as employees for all statutory and legal purpose. We have already seen that as per the agreement, the applicant would deal only with the contractor and give instructions to him only and not to the contractual worker. Thus, it appears that ....
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....applicant will not have, whether directly or indirectly, any control, supervision or the manner of the discharge, dismissal or retrenchment or reemployment of the workers engaged / employed by the Contractor. 27. As regards the rest of the contentions that the recovery of the amount would not qualify as supply under Section 7 of the CGST Act, the same has already been dealt with by this Authority in Re: Troikaa Pharmaceuticals Ltd. The applicant has also submitted that the supply should be effected in the course of furtherance of business and the activity under evaluation does not fall within the definition of business. Further, the applicant has submitted that as per the Allahabad High Court judgement of Indian Institute of Technology Vs State of Uttar Pradesh, canteen facility cannot be treated as an ancillary to the business activity. We find that the Bombay High Court in the case of CCE, Nagpur Vs Ultratech Cement Ltd- [2010 (260) ELT 369(Bom)] while dealing with the credit of service tax paid on outdoor catering service in canteen for employees had held that such outdoor catering service, which are provided as mandated under the Factories Act, 1948 have nexus or integral co....