TaxTMI 
TaxTMI 
TaxTMI 
2026 (4) TMI 278
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.... 3. If answer of question no. 2 is affirmative, wherever ITC is available on such service, whether it will be restricted to the extent of cost borne by the Applicant (employer)? 4. Whether canteen facility provided by employer to its employees' is a supply under GST, when only nominal amount is recovered from employees? 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 FACTS: 1.1 M/s. WIKA Instruments India Pvt. Ltd. (hereinafter referred to as "Applicant"), located Gat No 94 100, Plot No 40 47 52, Hi Cliff Industrial Estate, Kesnand, Pune, Maharashtra, 412207 having GSTIN 27AAACW2665A1ZL is engaged in the manufacturing of various types of process control instruments like pressure gauges, pressure transmitter,....
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....ufacture, 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 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 accepted by him in the course or furtherance of his trade, profession or vocation; (h) activities of a race club including by way of totalisator or a license to book maker or activities of a licensed book maker in such club; and]5 (i) any activity or transaction undertaken by the Central Government, a State Government or an....
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....orne by the applicant is cost to Company by virtue of the employment agreement. Applicant relies upon press release dated 10th July, 2017, wherein it was stated that supply 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. Also, when goods or services are provided in terms of the contract between the employer and employee is part and parcel of the cost to company (C2C) and cannot be subject to GST. 2.1.1.6 In view of above submissions, Applicant submits that transportation facility provided is not a supply under GST as it is a merely a facility provided in the course of employment. 2.1.2 If answer of question no. 1 is negative, whether exemption under Sr. No. 15 clause (b) of Notification No. 12/2017-Central Tax (Rate) dated 28th June 2017 is applicable to the Applicant? 2.1.2.1 Applicant submits that, assuming but without admitting, even if recovery from employees is treated as supply, Sr. no. 15(b) of Notification no. 12/2017-CT (Rate) dt. 28th June, 2017 specifically exempts "Transport of passengers, with or without accompanied belongings, by non air-conditioned....
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.... (b) the following supply of goods or services or both (i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) except when used for the purposes specified therein, life insurance and health insurance: 2.1.3.2 Further, in similar transactions carried out in pre-GST regime, it was held by various courts that credit is not admissible to manufacturer on part of cost borne by employee and thus ITC will be allowed only to the extent of cost borne by the employer. 2.1.3.3 Hence, in instance case, either Applicant needs to reverse ITC to the extent cost is borne by employees or he can avail ITC on pro-rata basis adopting a scientific method by calculating ratio of amount recovered from employees to total cost of input service. 2.1.4 Whether canteen facility provided by employer to its employees' is a supply under GST, when only nominal amount is recovered from employees ?? 2.1.4.1Recovery against canteen facility is not covered under the scope of supply. As per section 7(1) of CGST Act, 2017....
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....es activities performed by an employer for the benefit of its employees, provided that a consideration is involved. 3.1.2 In this case, the applicant is recovering a nominal amount from its employees for providing passenger transport services. The fact that a nominal amount is recovered establishes the presence of consideration, no matter how small the amount. Hence, the provision of transportation services qualifies as a supply of service under GST. 3.1.3 Further, under Schedule I of the CGST Act, activities performed without consideration between employer and employees are considered a supply, but this applies only to activities performed without any consideration. Since the employer is charging a nominal fee, Schedule I does not apply. 3.1.4 As per Schedule II, the provision of services for consideration in the course or furtherance of business is always considered a supply. Since the transportation service is provided in the course of business and is paid for, it qualifies as a supply. 3.1.5 Sr. No. 1 of Schedule-III of the CGST Act states: "Services by an employee to the employer in the course of or in relation to his employment" ar....
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.... This notification provides an exemption from GST for certain services. The relevant portion of Sr. No. 15(b) states: SI.No. Chapter Section, Heading, Group or Service Code (Tariff) Description of Services Rate (percent.) Condition (1) (2) (3) (4) (5) 15 Heading 9964 Transport of passengers, with or without accompanied belongings, by - (a) air, embarking from or terminating in an airport located in the state of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, or Tripura or at Bagdogra located in West Bengal; (b) non-air-conditioned contract carriage other than radio taxi, for transportation of passengers, excluding tourism, conducted tour, charter or hire; or (c) stage carriage other than airconditioned stage carriage. Nil Nil 3.2.2 To avail of the exemption under Sr. No. 15(b), the following conditions must be met: a. Mode of Transport: The service must involve the transportation of passengers in a non-air-conditioned contract carriage (i.e., the vehicle must not be air-conditioned). b. Exclusions: The exemption does not apply to services related to tourism, cond....
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....CGST Act, 2017 - Eligibility for ITC: Section 16 of the Central Goods and Services Tax Act, 2017 provides that a registered person is entitled to claim ITC on goods and services used or intended to be used in the course or furtherance of business. 3.3.2 Section 17(2) of the CGST Act, 2017 - Restriction of ITC on Exempt Supplies: a) Section 17(2) restricts the availment of ITC on inputs, input services, and capital goods to the extent they are used for providing exempt supplies. If the goods or services procured are used for both taxable and exempt supplies, the ITC must be proportionately reversed. b) In the case of exempt supplies, the registered person is not entitled to ITC to the extent that the services are used for making exempt supplies. 3.3.3 As per Section 2(47) of the CGST Act, exempt supply includes supplies attracting a Nil rate of tax, supplies wholly exempt from tax, and non-taxable supplies. Since passenger transportation in a non-air-conditioned contract carriage is exempt under Notification No. 12/2017 (Sr. No. 15(b)), it is treated as an exempt supply under GST. 3.3.4 Since the transport of employees in a non-air-conditioned bus is exemp....
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....defines "supply" to include all forms of sale, transfer, barter, exchange, license, rental, lease, or disposal made or agreed to be made for a consideration in the course or furtherance of business. As per the definition, any provision of goods or services for consideration would generally fall under the ambit of supply and be liable to GST. 3.4.2 Schedule I of the CGST Act, 2017 - Deemed Supply Without Consideration: Certain transactions, even if made without consideration, are deemed to be supplies under GST. For example, supplies made between related persons during the course of business are considered a supply even without consideration. Employer and employee are treated as related persons under GST law. Therefore, if goods or services are provided by an employer to an employee, it may be deemed as a supply even if no consideration is charged or only nominal consideration is recovered. 3.4.3 Schedule III of the CGST Act, 2017 - Services Not Considered as Supply: Clause 1 of Schedule III lists activities or transactions that are neither a supply of goods nor a supply of services. One of these includes: "Services by an employee to the employer in the course o....
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....rvice, as per the valuation rules under GST (Section 15 of the CGST Act). The nominal amount recovered may be subjected to GST based on the actual amount charged if the open market value is difficult to determine. 3.4.9 The canteen facility provided by the employer to its employees, for which a nominal amount is recovered, qualifies as a supply under GST. GST will be applicable on the amount recovered from employees. The applicant will need to determine the value of the supply, which could either be the nominal amount or the open market value, depending on the specific facts of the case. Conclusion: Yes, the canteen facility provided by employer to its employees is a supply under GST, even when only nominal amount is recovered from employees. 3.5 Further jurisdictional officer has made additional submission dated 15.10.2025 as follow, ---- As per Section 7(1)(a) of the CGST Act, 2017, "supply" includes all forms of supply of goods or services made for consideration in the course of furtherance of business. If the employer recovers the nominal amount from the employees for transport. It constitutes a consideration, and thus, could qualify as a service unde....
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....which are discussed in the discussion part of the order. (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 M/s. Tata Motors Ltd ((Order No. GST-ARA-23/2019-20/B-46 dated 25.08.2020) (3) Madhya Pradesh AAR in M/s. Bhavika Bhatia (Order No. 18/2019 dated 25.09.2019) (4) M/s. Panacea Bitotech Limited vs Commissioner Trade and taxes [(2013) 59 VST 524(Del) (5) State of Gujarat vs. Raipur Manufacturing Co. Ltd. (Civil Appeal No. 603 of 1966) (6) CCE Nagpur vs Ultratech Cements Ltd as reported in 2010 (260) ELT 369 (BOM) (7) M/s. Foods, Fats & Fertilizers Ltd. vs Commissioner of C.Ex. Guntur, 2009 (247) E.L.T. 209 (Tri-Bang) 4. HEARING Preliminary hearing in the matter was held on 15.10.2024. The authorized representative, Mr. Yogesh Ingle and Jurisdictional Officer, Mr. Avadhoot Khadilkar Assistant Commissioner of CGST was attended in the hearing. The application was admitted and called for final hearing on 06.11.2025. The authorized representative, Mr. Yogesh Ingle and Jurisdictional Officer Mr. F I Shaikh, Assistant Commissioner of C....
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....manufacture, supply, installation and commissioning of a wide range of Steam and Power Generation Plants for various industrial applications. The Applicant has taken view that supply of 'canteen services' or 'transportation services' cannot be regarded as 'in the course or furtherance of business'. CGST Act, 2017 defines the expression 'business' under section 2(17) of the CGST Act, 2017. The definition of 'business' as given in Section 2(17) of the CGST Act, 2017 is as under:- "(17) "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 ............ ............ This is an inclusive definition wherein various aspects have been listed in the clauses that would be included in 'business'. Clause '(a)' of this definition mentions various activities like trade, comm....
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....in connection with or incidental or ancillary to his main activity of manufacture and supply of wide range of steam and power generation plants. (3) 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". (4) Thus, as discussed above, the activity of supply of canteen services and transportation services provided to the employees falls under the definition of 'business' as these activities are in connection with or incidental or ancillary to the principal activity of the taxpayer as explained above. 5.1.3 Whether there is supply of canteen services and transportation services from the Applicant to the employees (1) Fundamentally, the subject issue pertains to the transaction between the Applicant and employees, i.e., with respect to the canteen services and transportation services (herein after both services are r....
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.... 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 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. Thus, it is derived....
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.... and transportation services are liable to levy of tax. 5.1.5 If incidental of 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 5.1.2 and 5.1.3, Applicant's activity of supply of canteen and transportation 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 and transportation services provided by th....
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.... under a contract, whether expressed or implied, for the use of such vehicle as a whole for the carriage of passengers mentioned therein and entered into by a person with a holder of a permit in relation to such vehicle or any person authorised by him in this behalf on a fixed or an agreed rate or sum- (a) on a time basis, whether or not with reference to any route or distance; or (b) from one point to another; and in either case, without stopping to pick up or set down passengers not included in the contract anywhere during the journey, and includes- (i) a maxicab; and (ii) a motor-cab notwithstanding that separate fares are charged for its passengers;" As per the above definition, Regional Transport Authority imposes certain conditions on the contract carriage permit holder for carrying contract carriage. Section 74 of the Motor Vehicles Act, 1988 which is relevant the contract carriage is produced as below. 74. Grant of contract carriage permit.- (1) Subject to the provisions of sub-section (3), a Regional Transport Authority may, on an application made to it under section 73, grant a contract carriage permit in accordance....
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....that the contract carriage permit holder is responsible for the operation of vehicles as per the conditions imposed in section 74 of the Motor Vehicles Act, 1988. In this case, the applicant is not the contract carriage permit holder and thus not bound by the conditions mentioned in the section 74 of the Motor Vehicles Act, 1988. As per the above definition of contract carriage, the passenger or passengers for hire or reward are to be engaged under a contract with them by a person with a holder of a permit of contract carriage. In this case, holder of a permit does not have any privity of contract with the passengers i.e. employees of the Applicant. Applicant has rented the buses from M/s. Sainath Travels. This transaction is in the nature of rent -a-cab service. M/s. Sainath Travels is charging his services of providing transport buses for carrying the employees @18% (9% SGST and 9% CGST). These invoices are raised to M/s. Wika Instruments India Pvt. Ltd. These services are in the nature of renting of services of transport vehicles with operators. Here, the transport service provider provides buses to M/s. Wika Instruments India Pvt. Ltd. and charges them on monthly basis fixed....
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....missioner, Central Excise, Customs and Service Tax held that Cenvat Credit is not eligible on facility of transportation provided by the appellant to its employees as same was merely in the nature of service for personal use or consumption of its employees. The substantial question of law involved in the said judgement is: 1. Whether the services provided by a Manufacturer of transportation of its employees, from their designated pick 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 cou....
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....ese services to his employees and the services provided comes under category of personal consumption which makes the applicant ineligible to avail input tax credit on the invoices issued to him by the transporter for transportation of employees as per Section 17(5)(g) of CGST/MGST Act 2017. 5.4 Value in respect of which canteen and transportation services are taxable 5.4.1 As explained in above paras, supply of canteen services and transportation services to the employees would in normal course constitute to be the supply of services u/s 7(1) of GST Act 2017. However, it is now clarified by the CBIC circular No. 172/04/2022/GST dated 6th July 2022 that perquisite provided to the employees in view of the Contractual Agreement would not be subjected to GST. It is clarified that such perquisite are in lieu of the services provided by the employees to the employer in the course of or in relation to his employment, and should not be subjected to GST. Supplies of any services would not be subjected to GST only under the following circumstances. 1. Such services are exempt under the notification number 12/2017-CT(R) dated 28/06/2017. 2. Such a transaction in ser....
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.... 'as corollary to this provision, the perquisite given to the employees in view of the contractual agreement are in lieu of services given by the employee to the employer and should not be subjected to GST'. As the supply of perquisite by the employer to the employee would not have respite from above two aspects mentioned at Sr.No.1 and 2 above as the said supply is neither exempted nor a Non-GST supply, it would be appropriate to interpret that the 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. 5.5.4 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....