AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2026 (4) TMI 135
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....nt of not serving the full notice period? 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 Advance Ruling, the expression 'GST Act' would mean CGST Act and MGST Act. 1. FACTS AND CONTENTION - AS PER THE APPLICANT: 1.1 QUESTION :1 Whether the GST would be payable on recoveries made from the employees towards providing canteen facility at subsidized rates in the factory cum office? 1.1.1 M/s Thyssenkrupp Industries India Pvt. Ltd. (hereinafter referred to as "the Applicant") is having its registered office at 154-C, Mittal Tower, 15th Floor, 210 Nariman Point, Mumbai - 400021 and having manufacturing plant cum office at Station Road Pimpri, Pune - 411018. The Applicant is engaged in the field of design, manufacture, supply, installation and commissioning of a wide range of Steam and Power Generation Plants for various industrial applicatio....
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....ice and sample pay-slip of employee for recovery are attached with this application. 1.2.2 The Applicant would like to know whether the GST would be payable on the recoveries made from the employees as a facilitator towards providing bus transportation facility. Whether the GST would be payable on the notice pay recoveries made from the employees on account of not serving the full notice period? 1.3.1 As a company employment policy, employees are required to serve notice period of three months However, there are instances where employees resign and leave the employment without serving the mandated notice period, in part or in full. Accordingly, as a company employment policy, the Applicant is entitled to monetary compensation ("Notice Pay Recovery"). In such cases, the Applicant deducts salary for the tenure of notice period not served as a compensation for breach of the terms of the Employment Agreement by the employees. 1.3.2 The Applicant would like to know whether the GST would be payable on the notice pay recoveries made from the employees on account of not serving the full notice period. 2. STATEMENT CONTAINING APPLICANT'S INTERPRETATION OF LAW 2.1 As ....
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....o constitute a "supply', the following elements are required to be satisfied: (i) there should be supply of "goods" and / or "services". (ii) supply is for a "consideration". (iii) supply is made "in the course or furtherance of business". 2.4 From the above, it is clear that any activity done against "consideration" is treated as "supply" however, such an activity must be in the course of business or for the furtherance of business. 2.5 The term "in the course of business" or "furtherance of business" is not defined under CGST Act. However, the term business has been defined in Section 2(17) of the CGST Act, 2017 which is reproduced below for your ready reference: "business" includes (a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit; (b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a); (c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction; (d) supply or acquisiti....
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.... 2(17), business also includes any activity which is in connection with or incidental or ancillary to the activities covered under clause (a) of Section 2(17) of the CGST Act. In this regard, activities which are having direct nexus with the main business can be said to be ancillary or incidental. However, canteen and employee bus transport facility are not related to or connected with the principal business of supply of design, manufacture, supply, installation and commissioning of a wide range of plant and machinery. Therefore, the same is not incidental or ancillary to the main business of the Applicant. 2.10 In this connection, reliance can be placed in the following advance rulings: a. M/s Emcure Pharmaceuticals Ltd. reported in 2022-TIOL-10-AAR-GST (Mumbai Bench) wherein it was held that - Tax would NOT be payable on recoveries made from the employees towards providing canteen facility at subsidized rates in the factory and office; Tax is NOT payable on the recoveries made from the employees towards providing bus transportation facility & Tax is NOT payable on the notice pay recoveries made from the employees on account of not serving the full notice peri....
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....ees and the contractor /Canteen Service Provider. Under these circumstances, the Gujarat Appellant Authority held that the GST is not applicable on the activity of collection of employees' portion of amount by the appellant, without making any supply of goods or service by the appellant to its employees. Copy of decision is enclosed with this application. 2.12 Accordingly, based on the reading of Section 7 and Section 2(17) of the CGST Act, 2017, the Applicant is of the view that recovery of certain amount towards canteen and employee bus transport facility is not in the course or furtherance of business and therefore, cannot be considered as "supply of service". 2.13 At the time of appointing any employee, the Applicant enters into an Employment Agreement (Appointment Letter) wherein it is mentioned that, either parties shall serve a certain time period's mandatory notice to terminate the said Agreement. As per the relevant clauses of the Employment Agreement, the employee shall have a right to resign by serving prior written notice of three months applicable to the Employee's grade, as per company policy or upon payment of money compensation in lieu of the notice period as ....
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....le on the notice pay recoveries made from the employees on account of not serving the full notice period. The concluding para of ruling by the same bench is reproduced below: 5.5.6 So, by taking into account the decisions as well as analysis, made in detail as above, it may be concluded that, recovery of notice pay from dues of employee / payment of notice pay by the employee who could not serve the notice for the period as per contractual agreement / appointment letter does not amount to supply and therefore as per Section 7(1A) of the CGST Act, 2017, the provisions of Schedule Il does not come into play. Thus, also relying on the reasoning and decision given by the MPAAAR, mentioned above and the decision of the Hon'ble Madras High Court in W.P. Nos 35728 to 35734 of 2016 in the case of GE T&D India Lid Vs Case Deputy Commr. of Central Excise, LTU, Chennai - 2020-VIL-39-MAD-ST, we hold that, the notice pay recovered by the applicant from its employees is not liable to GST. Copy of decision is enclosed with this application. 2.16 Considering above submissions and rulings by the same bench in similar matters, the Applicant is of the view that GST is not payable on th....
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....he Applicant. Since, the said services are provided by the third party service providers to the Applicant, the service providers are raising their invoices with applicable GST to the Applicant. The Applicant pays the consideration to the third-party service providers for the said canteen and transportation facilities. Thereafter, the Applicant recovers certain portion (i.e., subsidized amount is deducted from salary of the employees on monthly basis) of the cost of the canteen and bus transportation incurred by the Applicant from its employees. (4) Applicant has contended that the recovery of amounts from employees for canteen services or transportation services to employees do not fall under 'supply' as per section 7 of CGST Act, as supply of these services are not in the course or furtherance of 'business'. (5) Various grounds raised by the Applicant to contend that the recovery of amounts from the employees for providing canteen and transportation services are discussed as below. 5.1.2 Whether supply of canteen and transportation services provided to employees is in the course or furtherance of business. (1) We observe that the Applicant has argued that h....
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....al 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 clarify that any activity, which supports the main activity or necessary to carry out the principal activity, is an activity or transaction in connection with or incidental to or ancillary to the principal activity. The activity of providing food in canteen and transportation services to its workers who are pivotal to his principal activity can definitely be said to be in connecti....
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....ond transaction, the Applicant is supplying these services to their employees for which the Applicant is receiving consideration, although at the subsidized rate, from their employees. The respective service provider invoices the appellant for the entire services. He charges the consideration along with GST thereon. There is no privity of contract between these service providers and the employees. It is the Applicant which is providing these services to the employees. Applicant deducts certain amount from salary of the employees against this supply. Applicant makes only part of the recovery and balance cost is borne by him. Hence, the criteria of 'business', 'consideration' are met in the transaction of supply of these services by Applicant to the employees. Thus, there is supply of canteen services and transportation services from the Applicant to the employees, u/s. 7(1) of CGST Act, 2017. 5.1.4 Taxability of Supply of Canteen services and transportation services to the employees (1) Whether the perquisites forming part of employment contract excluded from GST. As per the Circular no. 172/04/2022-GST dated 06.07.2022 of CBIC, the relevant extract of the said circular is rep....
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....ecting any accommodation provided to the assessee by his employer; (iii)---------------- ..........." (3) As per Income Tax Act, 1961, perquisite is defined to be the value of free benefit or facility given by the employer to his 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, any service rendered on a concessional basis shall qualify as a perquisite. But, it is to be noted that only the value to the extent of concession offered by the employer is to be treated as a perquisite and not the remaining portion that has been charged by the employer. Applying the said analogy to the instant case, in respect of the canteen and transportation services provided by the applicant to its employees, it becomes clear that the exemption provided in Entry 1 of Schedule III to the CGST Act, 2017 applies only to the concession part extended to the employees and not on the value charged to the employees. Thus, the recoveries made from the employees for canteen and transportation services are liable to levy of tax. 5.1.5 If incidental of ancillar....
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....nor a Non-GST supply. Hence, it needs to be analysed if such services can be called as supply u/s 7. 5.2.3 The activity of provision of canteen 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 section 25, when made in the course or furtherance of business: Provided that gifts not exceeding fifty thousand rupees in value in a financial year by an employer to an employee shall not be treated as supply of goods or services or both.'. Further, Explanation to Section 15 reads as below. Explanation. - For the purposes of this Act, -- (a) persons shall be deemed to be -related persons if - (i) such persons are officers or directors of one another's businesses; (ii) such persons are legally recognised partners in business; (iii) such persons are employer an....
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....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. 5.2.5 The applicant relied on following rulings, (1) Maharashtra AAR in M/s. Emcure Pharmaceuticals Ltd (Order No. GST-ARA-119/2019-20/B-03 dated 04.01.2022) (2) Maharashtra AAR in Integrated Decisions and Systems India Pvt. Ltd. (Order No. GST ARA-116/2019-20/B-113 dated 16.12.2021) (3) Maharashtra AAR in M/s. Tata Motors Ltd ((Order No. GST-ARA-23/2019-20/B-46 dated 25.08.2020)) (4) Madhya Pradesh AAAR in M/s. Bharat Oman Refineries Ltd. (Order No. MP/AAAR/07/2021 dated 08.11.2021) (5) Gujarat AAAR in M/s. Amneal Pharmaceuticals Pvt. Ltd (Order No. GUJ/GAAAR/APPEAL/2021/07 dated 08.03.2021) We would like to place on record that an advance ruling pronounced by the Authority or the Appellate Authority shall be binding only on the applicant who had sought it, and the concerned officer or the jurisdictional officer in respect of the applicant. 5.3 Whether the GST would be payable on the notice pay recoveries made from the employees on account of not serving the full notice ....