AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2026 (4) TMI 132
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....er to above is yes, whether GST is applicable on the nominal amount to be deducted from the salaries of employees b. Whether input tax credit (ITC) is available to the Applicant on GST charged by the Canteen Service Providers for providing the catering services? If yes, whether ITC is restricted to the extent of cost borne by the Applicant only? Q2: Whether the deduction of nominal amount by the Applicant from the salary of employees for availing the non-airconditioned bus transportation facility provided by Transport Service Providers, would be construed as "Supply of Service" by the Applicant to its employees? a. If answer to above question is yes, whether GST is applicable on the nominal amount to be deducted from the salaries of its employees? b. b. Whether ITC is available to the Applicant on GST charged by the Transport Service Providers for providing the transportation services? If yes, whether ITC is restricted to the extent of cost borne by the Applicant only? Q 3: Whether GST is applicable on payment of salary in lieu of notice pay from the full and final settlement of the employees leaving the Company without THO completing or....
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...."), it is required to comply with all the obligations and responsibilities cast under the provisions of the said Act. 1.5 Section 46 of the Factories Act, 1948 provides that "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, the Applicant also refers to Section 2(n) of the Factories Act, 1948 which defines the term 'occupier' of a factory to mean "the person who has ultimate control over the affairs of the factory". In the instant case, the Applicant has the ultimate control over BA the affairs of the factory and hence will be treated as the occupier. 1.6. Since the factory premises of the Applicant are located far away from local city limits and considering the time and efforts required for arranging food on daily basis, there arose a basic need for the provision of food facility to the Applicant's employees by engaging Canteen Service Providers. 1.7. To cater to the above-mentioned requirement, the Applicant has set up a canteen facility a demarcated area within its factory premises wherein tables, chairs, utensils, washrooms....
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....very Per Item Total Amount of Recovery for 26 Days L3, L2, L1, T3, T2, T1, DET, Trainees, Trade apprentices & Contract labour Snacks Meal 48 19.20 29.0 749 Snacks 17.5 6.50 10.8 280 Total 65.5 25.70 39.8 1029 Grades/Category Food Items Actual Cost per item Company Contribution Revised Employee Recovery Per Item Total Amount of Recovery for 26 Days L4 & Above employees Meal 48 19.20 29.0 749 Snacks 17.5 6.50 17.5 455 Total 65.5 25.70 46.5 1204 1.12 It may be stated at this juncture that the above-mentioned policy is applicable only to the employees of the Applicant. No one else including the Visitors of the Applicant's factory would be allowed to avail the food facility since it is meant only for Applicant's employees. Every employee, who wishes to avail the canteen services would have to necessarily punch in his/her food card or bio matric record and avail the facility. Thereafter, the above stated amount of cost of plates consumed during the month is deducted from the respective employee's salary. The balance monthly cost of the food plate is borne by t....
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....'s contractual obligation with the employees. Further, to ensure that this facility would only be used by the authorized persons/employees of the Applicant, the Applicant would continue to issue a specific pass / employee card to eligible employees so as to ensure that no employee can avail the bus transportation service without showing the said pass/ employee card. 1.18 The Transport Service Providers would have contract carriage permit issued by the relevant regulators authorities in respect of buses deployed for employee transportation service. The service providers shall provide point to point transportation facility to employees by ensuring that driver only take routes approved by the Applicant. Background with respect to deduction on account of employee leaving the applicant without serving the notice period: 1.19 As a part of internal business process of the Applicant, every employee, at the time of Joining the Applicant's concern, is issued an appointment letter highlighting various terms and conditions of employment such as job band, designation, date of appointment, place of posting etc. and the salary structure. 1.20 One of the terms is in relation to the res....
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.... for the part of notice period which is not served. 1.24. The amount of notice pay is deducted from the full and final settlement of the employee and is/not collected as a separate payment from the employees. The said amount of notice pay deducted is to discourage the employees from serving a shorter notice period and is in the nature of damages for breach of the terms of the Employment Agreement by the Employee. 2. STATEMENT CONTAINING APPLICANT'S INTERPRETATION OF LAW 2.1 At the outset, the applicant wishes to reiterate the submissions made in the AAR submitted before the Advance Ruling Authority Mumbai on 27 September 2021, bearing ref. no. 39/2021-22. In addition to the same, the applicant wishes to make the following additional submissions in support of multiple developments in the GST law. 2.2 In light of the above, the applicant would like to submit additional submissions based on the discussion as per the direction of your good office, as explained in the submissions below. To this end, the applicant prays before the Advance Ruling Authority Mumbai, to kindly treat the following additional submissions as a part and parcel of the original AAR submitted dated 27 S....
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.... goods or services under Entry No. 1 of Schedule III of the Central Goods and Services Act, 2017 ("CGST Act") and, therefore, are not subject to Goods and Services Tax ("GST"). This position was also earlier made known to the public through the Press Release dated 10 July 2017, attached as Annexure. Accordingly, it is submitted that perquisites extended by an employer to its employees pursuant to the terms of the contractual agreement of employment shall not be regarded as a 'supply' for the purposes of the Central Goods and Services Tax Act, 2017. Consequently, no Goods and Services Tax is leviable on such perquisites. 2.7 Furthermore, the Applicant respectfully places reliance upon Circular No. 172/04/2022-GST dated 6 July 2022, wherein it has been categorically clarified that any benefit or perquisite extended to employees pursuant to the terms of the employment contract shall not be subject to the levy of Goods and Services Tax. The relevant extract of the said Circular is reproduced below for ready reference: "Q5. Whether various perquisites provided by the employer to its employees in terms of the contractual agreement entered into between the employer and the emp....
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.... transport facility to employees is nowhere connected with the business of the applicant". Accordingly, it was ruled that the subsidised shared transport facility to the employees in terms of the employment contract through third party vendors would not be construed as "Supply of Service" by the company to its employees. 2.11 Reliance in this regard is also placed on the Advance Ruling passed in Re: Zydus Lifesciences Ltd. [Guj/GAAR/R/2022/42] wherein it has been observed as under: '10.4 The provision of services of transport and canteen facility to its employees is as per the contractual agreement between the employee and the employer in relation to the employment. As cited in the above-referred provisions of Schedule III and the clarification issued vide Circular No. 172/04/2022-GST dated 06-07-2022, the provision of the services of transportation and canteen facility cannot be considered as supply of goods or services and hence cannot be subjected to GST. 2.12 The Gujarat AAR has taken a similar view in the case of M/s. SRF Limited vide Advance Ruling No. Guj/GAAR/R/2022/41 dated 28.09.2022, it has been ruled that "GST is not leviable on the amount representing th....
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....d to workers, specifically requiring that such services be rendered on a non-profit basis, with only limited exceptions for co-operative societies. Availment of credit on canteen services is not restricted under section 17(5) of the CGST Act when the employer is under a mandatory obligation to provide such services. 2.15 Applicant wishes to draw the attention of your good office towards Section 17(5) of the CGST Act, 2017, which generally restricts ITC on specific goods and services, including food and beverages. However, an important exception exists where these services are mandatorily provided by an employer to employees under prevailing laws. This aspect is particularly relevant for the applicant operating a factory in Maharashtra, where legal obligations under the Maharashtra Factories Rules, 1963, require certain facilities to be provided to employees. Section 17(5) of the CGST Act, 2017 (Relevant Extract): (5) Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (1) of section 18, input tax credit shall not be available in respect of the following, namely :- (b) the following supply of goods or services or both- ....
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....on (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 (ii) 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 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, an....
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.... it very clear that if the motor vehicle hired by them does not have an approved seating capacity of more than thirteen persons (including the driver), then in that case the Appellant will not be eligible for Input Tax Credit' 2.22 The Applicant further submits that the Hon'ble Appellate Authority for Advance Ruling, Madhya Pradesh, in Bridgestone India Private Limited [MP/AAAR/03/2024 dated 31 December 2024] held that Input Tax Credit (ITC) is available on GST charged by the transport service provider for providing non-air-conditioned bus transportation services, subject to the condition that the buses hired have a seating capacity of more than 13 passengers. 2.23 We wish to reiterate and emphasise the position discussed during the virtual hearing held on 3rd September 2025 regarding the applicability of GST on the payment of salary in lieu of notice pay, which is typically recovered from employees as part of their full and final settlement when they leave the Company without serving the complete notice period as specified in their appointment letter. In this context, it is crucial to refer to the clarification provided by the Central Board of Indirect Taxes and Customs (CBI....
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....ase 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 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. 2.28 Without prejudice to the aforementioned submissions, the Applicant wishes to also submit that in order to attract GST on the nominal cost being recovered from the employees, it is essential that it shall fulfil all the essential conditions of Supply, as defined under Section 7 of the CGST Act, 2017, as mentioned above. 2.29 The term 'Supply includes all forms of supply (goods and/or services, and includes agreeing to supply when the supply is for a consideration and is in the course or furtherance of business. The word 'supply' is all-encompassing, subject to exceptions carved out in the relevant provisions. 2.30 It is pertinent to study various facets of the Supply concept, as mentioned under Section 7 of the CGST Act, from the perspective of the facts under discussion. The Applicant believes that the following criteria, inter alia, plays a cru....
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....m "consideration" against the deduction of nominal amount from its employees' salary. 2.35 The term 'consideration' has been defined in Section 2(31) of the CGST Act, 2017 which is provided below: 'consideration' in relation to the supply of goods or services or both includes, a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government; (b) the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government. Provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply. 2.36 The Applicant wishes to submit that a supply must involve enforceable re....
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.... 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. 2.42 in the light of the above interpretation by the Hon'ble Apex Court as well as the Hon'ble Allahabad High Court, it is reiterated that canteen services cannot be treated as ancillary to the business activity of the Applicant. Further, the canteen services provided are an ingredient of the wage negotiation with the employer and would form part of the consideration under employment agreement. 2.43 The Applicant wishes to draw your kind attention towards various judicial precedents allowing the input tax credit to the assessee under negative list regime of taxation of services under Finance Act, 2012. In the case of M/s Hindustan Coca Cola Beverages Pvt. Ltd. v/s CCE, Nashik?, the Hon'ble CESTAT, Mumbai Bench held that post 2011, canteen service is excluded from input service definition only when such ser....
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....ble." 2.47 As per the terms agreed with the employee at the time of issuance of Appointment letter, the Applicant is required to provide the transport services to its employees to commute between the factory premises and pick-up point as per the policy of the Company. Therefore, it can be construed that the transportation facility is rendered in accordance with employment terms with the employees of the Applicant. The supply shall be effected for a 'consideration'. 2.48 The Applicant wishes to reiterate its submissions mentioned vide Paragraphs 2.19 to 2.23 supra, which is also equally application in the given situation. Thus, it can be said that there is an absence of consideration in the given facts of the case. The supply should be effected in the course or furtherance of business under the CGST act, 2017. 2.49 The Applicant has engaged a certain third-party Transport Service Providers to provide transportation facility to its employees for 'to and fro' commutation between office and residence in non-air-conditioned buses. The provision of the said facility is in accordance with the contractual obligation with the employees since this is one of the terms of their emp....
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....licant in accordance with Section 2(17) of the CGST Act, 2017. 2.55 The above view that the applicant is not engaged into the business of provision of transportation service has been affirmed by the AAR authorities in the Advance Ruling pronounced by the Maharashtra Authority for Advance Ruling in M/s. Posco India Pune Processing Center Private Limited, in M/s Jotun India Pvt. Ltd, to vindicate their stand (as laid above in Para 1.41 to 1.44) and in M/s lon Trading India Private limited reported in [2020] 113 taxmann.com 609 (AAR UTTAR PRADESH), wherein the amount recovered from the employees towards self or parental insurance premium payable to the insurance company would not be deemed as "Supply of service" by the applicant to its employees. 2.56 Similar view has been provided in case of In re M/s North Shore Technologies Private Limited, Order No. 59 dated 29 June 2020, wherein AAR Uttar Pradesh provided that subsidized shared transport facility by the applicant to its employees in terms of employment contract through third party vendors, would not be construed as "supply of service" by the applicant to its employees. 2.57 From the aforesaid legal provisions, judicial p....
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.... • Service is provided for transportation of passengers • By a non-air-conditioned contract carriage • The vehicle should have a contract permit under the Motor Vehicle Act • Requirement under Section 2(17) of the Motor Vehicle Act shall be fulfilled • The transportation shall not be for the purpose of tourism, conducted tours, charter or hire • It should not be a radio taxi 2.62 As observed by the Hon'ble AAR Maharashtra vide Para 2.12 of the Tata Motors Limited Ruling: in such circumstances, even though the Applicant recovers nominal amount from its employees, it cannot be said that particular employee has obtained the bus on hire or charter from the Applicant. Consequently, the Applicant would be eligible for the aforesaid exemption provided to transport of passengers in a non-air conditioned contract carriage. In light of the same, the Applicant in the instant case is eligible for the above-mentioned exemption. 2.63 Thus, in the light of the above-mentioned exemption notification, the Applicant wishes to submit that the GST shall not be leviable to the extent of nominal value recovered from the emplo....
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....being provided in the factory of the Applicant due to the mandatory requirement as per the Factories Act, 1948 and that the Canteen Policy is a part and parcel of the employment terms and conditions. 3.4 The term, 'outward supply', has been defined in Section 2(83) of the CGST Act, 2017, as below: 'Outward Supply' in relation to a taxable person, means supply of goods 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". 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); ... 3.4.1 From the plane reading of the definition of "business", it can be safely concluded that the supply of food by the applicant to its employees would come under clause (b) of Section 2(17) as a transaction incident....
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....7 and therefore, taxable as a supply under GST. 3.5.1 In the pre-GST period, vide SI No. 19 and 19A of Notification No. 25/2012-ST dated 20.60.2012 as amended by Notification No. 14/2013-Service Tax dated 22.10.2013 the 'services provided in relation to serving of food or beverages by a canteen maintained in a factory covered under the Factories Act, 1948 (63 of 1948), including a canteen having the facility of air-conditioning or central air-heating at any time during the year' was exempted from service tax. But there is no similar provision under the GST laws. 3.6 The Kerala AAAR in the matter of Caltech Polymers (P.) Ltd. held that the provision of food items to the employees for a consideration in a canteen run by company would come under definition of 'outward supply' and hence, shall be taxable as supply of service under GST. 3.7 The Haryana AAR in Musashi Auto Parts Put. Ltd. even when the third-party canteen service provider was involved, held that supply of coupons (for purchasing food) by employer to employees at 25% of the cost of food were taxable. The AAR was of the view that Schedule III of the CGST Act, 2017 only provides that services of employees to the em....
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....e non-airconditioned bus transportation facility provided by Transport Service Providers, would be construed as "Supply of Service" by the Applicant to its employees? 3.11 Applicant has submitted that they have entered into a contract with several Transport service providers to provide transportation facility to its employees for 'to and fro' commutation between office and residence in non-air-conditioned buses having seating capacity of more than 13 persons. The provision of this transportation facility is stipulated in the employment contract at the time of joining the company and is therefore considered to arise out of the Applicant's contractual obligation with the employees. Specific pass /employee card is issued to eligible employee to avail this facility. The cost of such services are deducted from monthly emoluments of the employee. 3.11.1 They have submitted that the transport arrangements to their employees and making payment to the third party service providers is not an activity which is incidental or ancillary to the activity of manufacturing ferrous and non-ferrous goods nor can it be called an activity done in the course of furtherance of manufacturing these fi....
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....hether GST is applicable on payment of salary in lieu of Notice Pay from the full and final settlement of the employees leaving the company without completing or serving the complete notice period as specified in the appointment letter? 3.14 The Notice Pay policy of the Applicant as stated by them: a) For resignation of employees during Probation period: The Notice Period will be one month and any shortfall in the notice period will be deducted from employees' salary. b) For resignation of employee confirmed in services: The Notice Period will be 2 or 3 months and any shortfall in the notice period will be deducted from employees salary. 3.14.1 The Applicant has referred to serial No. 5(e) of Schedule II of the CGST Act, 2017 which treats the listed services as supply of services:- 5(e): agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act; 3.14.2 The Applicant has contended that serial No. 5(e) is not applicable to them as said transaction (notice pay recoveries) cannot be construed as supply of services, due to the following reasons as stated by them: i) that the deduction is in accordance ....
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.... the service of the applicant-company. Thus, by relieving an employee without notice period or by accepting a shorter notice period, the Applicant is tolerating an act or a situation created by such action of the employee, and therefore, it is covered by Para 5(e) of Schedule II of the CGST Act, and is a supply of service. Here the company is actually "providing a service" to an employee and hence GST should be applied on that. Under the GST framework, tax is levied on any activity that is viewed as supply of service-whether directly or deemed supply. 3.16 Relied upon cases: (1) The Gujarat Authority of Advanced Ruling in July 2020 on an application by M/s. Amneal Pharmaceuticals Pvt Ltd, Ahmedabad the GST authority had ruled that the applicant is "liable to pay GST on recovery of notice pay" from the employees leaving the company without completing the notice period as specified in the appointment letter issued as per the contract entered between the employer and the employee. 3.16.1 (2) Further, in the ruling related to Bharat Oman Refineries, a subsidiary of state-owned Bharat Petroleum, the AAR has clarified that the employee is liable to pay GST on salaries received for ....
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....f the Factories Act, 1948 (hereinafter referred to as "Factories Act"), it is required to comply with all the obligations and responsibilities cast under the provisions of the said Act. (5) Section 46 of the Factories Act, 1948 provides that "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, the Applicant also refers to Section 2(n) of the Factories Act, 1948 which defines the term 'occupier' of a factory to mean "the person who has ultimate control over the affairs of the factory". In the instant case, the Applicant has the ultimate control over the affairs of the factory and hence will be treated as the occupier. (6) Such canteen facility is set up by the Applicant out of the mandate laid down by the Factories Act, 1948 as well as Maharashtra Factories Act 1963. (7) As per the arrangement, it would be the Canteen Service Provider's responsibility to bring ready to-eat food to the factory for immediate consumption by the Applicant's employees. (8) Every employee, who wishes to avail the canteen services would have to necessa....
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.... of recovery of Canteen and transportation services provided to the employees. 5.4.1 In order to provide the said canteen and bus transportation facility, the Applicant has engaged third party service providers who are providing the said canteen and bus transportation facilities to the 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. 5.4.2 Let us analyse whether there is supply of canteen services and transportation services from the Applicant to the employees and consideration. 5.4.3 The term 'supply' has been defined in Section 7 of CGST Act as follows: (Relevant extract from the CGST Act, 2017 (1) For the purposes of this Act, the expression "supply" includes ....
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.... it becomes important to analyze whether provision of canteen and transportation facility could be considered as "in the course or furtherance of business". 5.4.5 In this regard, the definition of 'business', as defined in Section 2(17) of the CGST Act 2017 is as below: "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); (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 acquisition of goods including capital goods and services in connection with commencement or closure of business; (e) provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members, (f) admission, for a consideration, of persons to any premises, (g) services supplied by a person as the holder of an office which has been acc....
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....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 connection with or incidental or ancillary to his main activity of manufacture and supply of various goods. Further, in terms of Section 2(17) (c), as mentioned in para (1) above, the volume of transaction is immaterial for the purpose of coverage under "Business", therefore, even if supply of food is quite insignificant activity in terms of volume of transaction, still in terms of clause (c) of the aforesaid section, the activity of supply of canteen and transportation services, falls within the definition of "business". 5.4.7 Now, let us analyse the nature....
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....n services and transportation services to the employees 5.5.1 Another contention of the Applicant is that 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 reproduced hereunder for ease of reference: S.No. Issue Clarification 5. Whether various perquisites provided by the employer to its employees in terms of contractual agreement entered into between the employer and the employee are liable for GST? 1. Schedule III to the CGST Act provides that "services by employee to the employer in the course of or in relation to his employment" will not be considered as 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 t....
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....at 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. 5.5.3 If incidental or ancillary supply of goods or services such as canteen or transportation 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 5.4.6 and 5.4.7, Applicant's activity of supply of canteen and transportation services falls u/s 7(1) of CGST Act, 2017. As discussed in Para 5.5.2 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 ....
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...., 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 is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply; (ii) membership of a club, health and fitness centre; and (iii) travel benefits extended to employees on vacation such as leave or home travel concession Provided that the input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force." 5.6.3 As per Section 17(5) of the CGST Act, ITC on food and beverages, outdoor catering, etc. is not available. However, it is seen that a proviso after sub-clause (iii) of clause (b) of sub-section (5) of section 17 of the CGST Act is provided to clarify that the I....
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.... 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. 5.6.4 The Applicant has submitted that they are a manufacturing unit and that there are more than 250 workers in the factory and in accordance with Section 46 of the Factories Act, 1948,, it is obligatory on them to provide canteen facilities within the factory premises. Thus, in light of the above-mentioned provisions, the ITC of the GST paid in relation to canteen charges is not blocked under u/s 17(5)(b). However, the issue of eligibility of input tax credit needs to be examined further in the light of the facts of the present case and various Tax Notifications. 5.6.5 From the facts of the case, it is clear that Canteen Contractor is providing Restaurant Service to the Applicant which is chargeable to GST at 5% rate in terms of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, as amended, without availment of ITC. Under explanatio....
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....ging, a Canteen Contractor, he can't be allowed to adopt an interpretation for availing ITC which is not available to him in a case of direct supply of the said service. 5.6.9 The Applicant has relied on the following judgments. 1. M/s Hindustan Coca Cola Beverages Pvt. Ltd. v/s CCE, Nashik. 2. Cema Electric Lighting Products India Private Limited Vs. CCE. 3. Cinemax India Limited Vs Union of India. [MANU/GJ/1053/2011]. The 4. Indian Institute of Technology Vs. State of Uttar Pradesh & Ors [MANU/UP/0242/1974]. The facts in these cases and the provisions of the law applied to the facts in these cases are different from present case, and hence are not applicable to the present case. 5.6.10 The Applicant further relied on following ruling. 1) Maharashtra AAR in RE: Tata Motors Limited in [2021-TIOL-197-AAR-GST-2020-VIL-257-AAR], in which the judgment given by Hon. Bombay High Court in case of M/s. Ultratech Cement Ltd CCE, Nagpur was referred. 2) Maharashtra AAR in a ruling in RE: Posco India Pune Processing Centre Pvt Ltd (Order dated 07.09.2018), 3) Maharashtra AAR, in M/s Jotun India Pvt Ltd (Order dated 4.10.2....
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....up points to their workplace, by Bus, would amount to a service for personal use or consumption of any of the employees?" 2. Whether the activity of providing bus transport services to its employees, at the cost of the Manufacturer, to reach factory in time and the expenses incurred by the Manufacturer in providing such service, (which amount is taken into consideration, while determining the final price of the product) can be said to be a component leading to the manufacturing activity, so as to entitle the Manufacturer, the benefit of Cenvat Credit? The view held by Hon'ble High court is produced below: "The transportation of employees from distance of about 40 kms for reaching factory is not an activity which could be said to be a part of manufacturing activity. It is merely for personal convenience of the employees to enable them to reach the premises of the factory so as to thereafter participate in the manufacturing activity. In this regard, the reliance is placed on the judgment of the Karnataka High Court in Toyota Kirloskar Motor Private Limited vs The Commissioner of Central Tax wherein food and beverages were provided by the appellant ....
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....portation 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 5.8.2 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....
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....e perquisite given to the employees in view of the contractual 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. 5.8.4 The value of the outward supply of canteen and transportation service can be considered as having two parts. First part is the amount of recovery that is made from the employees, and second part is balance value of the services provided 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 ....