In re Amneal Pharmaceuticals Pvt. Limited (GST AAR Gujarat)
The Gujarat Authority for Advance Ruling (AAR) addressed the query of M/s. Amneal Pharmaceuticals Private Limited, concerning the eligibility of Input Tax Credit (ITC) on Goods and Services Tax (GST) charged by canteen service providers. Amneal, a pharmaceutical manufacturer with over 250 employees and registered under the Factories Act, 1948, provides mandatory canteen facilities at its Bavla factory, as per legal requirements. The company contracts with external canteen service providers (CSP) who invoice them, including applicable GST, based on employee consumption. Amneal bears a portion of the canteen expenses, while employees cover the rest, with Amneal asserting that the employee contributions are remitted to the CSP without any profit margin. The company sought clarity on whether it could claim ITC for the employer-borne portion of the GST, citing the amended Section 17(5)(b) of the CGST Act, 2017, and CBIC Circular No. 172/4/2022-GST, which clarified the applicability of the proviso related to mandatory employee provisions under any law. Amneal referenced prior rulings, including those in AIA Engineering Limited and Dormer Tools India Private Ltd, to support their claim.
The AAR examined the applicant’s submissions, the relevant provisions of the CGST Act, and the Factories Act, 1948, along with the Gujarat Factories Rules, 1963. The core issue was whether Amneal could claim ITC for GST charged by the CSP for canteen services mandated by law. The ruling highlighted the amendment to Section 17(5)(b) of the CGST Act, effective from February 1, 2019, and the CBIC circular that clarified the proviso’s applicability to the entire clause. This proviso allows ITC for goods or services that an employer is legally obliged to provide. The AAR acknowledged that Amneal’s canteen provision was mandatory under the Factories Act and the Gujarat Factories Rules. Consequently, the AAR ruled that Amneal is eligible to claim ITC on the GST charged by the CSP, but only to the extent of the expenses borne by the company. The ruling explicitly disallowed ITC on the portion of the canteen costs recovered from the employees, aligning with the principle that ITC is applicable to business-related expenses and not employee reimbursements. The ruling also referenced the Gujarat Appellate Authority for Advance Ruling order in M/s. Tata Motors Ltd, Ahmedabad, substantiating their decision.
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, GUJARAT
