Case Law Details
In re National Aluminium Company Ltd. (GST AAR Odisha)
Advance Ruling in respect of entitlement to take credit of input tax paid on various goods and services used for maintenance of applicant’s township, guesthouse, hospital, horticulture in its ordinary course of business.
Establishment of hospitals and maintenance thereof may be for discharging the statutory obligation under the ESI Act by the employer, but dispensing medical service to the employees and others is a supply of service by the employer (the applicant in this case). Such service being nil rated will fall under exempt supplies. Consequently, the inputs and input services received by the applicant for dispensing the exempt service will not qualify for input tax credit in terms of Section 17 (2) of the OGST/CGST Act. It is made clear that the ruling to be issued is based on the current provisions of law. For the sake of further clarification we consider it appropriate to discuss the amendment of Section 17 (5) as brought in the CGST (Amendment) Act, 2018(yet to be made effective) wherein clause (a) and (b) of sub-section (5) of Section 17 have been substituted with a Proviso in the substituted clause (b) providing for input tax credit in respect of such goods or services or both, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force. In the provisions of law, as its stand today, there is no such provision providing for input tax credit in respect of goods and/or services procured by an employer for supply to the employees for discharging any statutory obligation. In the absence of such provisions, input tax credit shall not be available to the applicant in respect of the services and goods procured for maintenance of hospital and pharmacy outlet as per the current provisions in the OGST/CGST Act. Detailed observation on the services availed by the applicant in relation to the hospitals and pharmacy outlets have been made para 4.3.
Establishing, maintaining and furnishing guest houses including landscaping by way of gardening or otherwise is neither a perquisite nor a statutory obligation. It is purely for providing accommodation service to guests including employees on tour. This is in fact a business requirement to maintain such facilities and accordingly the applicant is entitled to input tax credit of the tax paid on inward supply of input and input services for maintenance of the guest house, transit house, and training hostels, but excluding the food and beverages provided in such establishments. Credit of such input services are as such blocked in clause b of Sub section 5 of section 17 of the OGST and CGST Act. In the case of the applicant, the listed services do not contain any catering service, but the application seeks for a ruling even on such service. It is further clarified that, the applicant might not be charging anything from the guest or the trainees for providing food and beverages in the guest houses and training hostels and in such case the inputs used for preparing the food and beverages or input catering services shall not qualify for input tax credit.
On scrutiny of the services listed in Annexure-A against which the current ruling is being issued, it was found that the applicant is availing services for plantation both inside the plant area as well as outside the plant area. Some of the contracts are for urban plantation in Koraput and annual plantation in unspecified area. Such services are definitely not in the course of or for furtherance of business. It may be obligatory for the applicant to undertake such plantation, but certainly not a business requirement. Hence, plantation and maintenance of such plantation outside the plant area being for non business use will not qualify for input tax credit in terms section 17(1) of CGST and OGST Act. Similarly, services for maintenance of plant and gardens within the residential colony and other public utility created by the applicant will form part of the residential colony and in turn part of the perquisite provided to the employees. Services availed in relation to the plants and garden in the residential colony will not qualify for input tax credit for the reasons discussed in para 5.0. It was also found that the plantation and maintenance of gardens are undertaken within plant area and other business establishments like administrative building and guest houses. Services availed in relation to plantation and gardening within the plant area including mining area and the premises of other business establishment as mentioned above will qualify for input service credit.
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