Case Law Details

Case Name : In re Kandla Port Trust (GST AAR Gujarat)
Appeal Number : Advance Ruling No. GUJ/GAAR/R/13/2019
Date of Judgement/Order : 22/08/2019
Related Assessment Year :

In re Kandla Port Trust (GST AAR Gujarat)

Whether Input Tax Credit with respect to expenses incurred by Deendayal Port Trust for maintaining its employees is available or not?

As per clear reading of Sub Section (1) of Section 16 and sub section (1) of Section 17 of the CGST Act, 2017, it is clear that a registered person is entitled to take credit of input tax charged on supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business only.

Applicant is incurring following expenses for providing common facilities to their employees –

a. Purchase of medicines for employees as prescribed by their doctor from outside on contractual basis.

b. Purchase of movable medical equipment at hospital.

c. AMC for repair and maintenance of residential colony and hospitals and school (other than new constructions, ITC for which is blocked u/s 15 of CGST Act, 2017).

d. Telephones & Mobiles at residence of officers and at hospitals.

e. Caretaking /housekeeping services at Guest House.

Applicant is engaged in supply of port services to various clients. Said expenses are for providing common facilities to their employees within the residential colony and the same are not relates to furtherance of their business/output service i.e. “Port Service”. It is very clear from the provisions of Sub Section (1) of Section 16 and Sub section (1) of Section 17 of the CGST Act, 2017, that a registered person is entitled to take credit of input tax charged on supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business only. In view of the above, the applicant is not entitled to take credit of input tax charged in respect of above mentioned expenses as the same is not used in furtherance of their business.

FULL TEXT OF ORDER OF BEFORE THE AUTHORITY OF ADVANCE RULING,GUJARAT

2. M/s. Kandla Port Trust (Deendayal Port Trust), CDC Section, Sewa Sadan- III, Kandla, Kachchh (hereinafter referred to as the “Applicant” for the sake of brevity), is engaged in port service to various clients. The applicant has residential colony for employees of the port. Quarters have been given to their employees on nominal fees and various other common facility centers like Hospital, Sports Complex, Garden, Guest House for official visitors and School for employee’s children, are available within the colony. Further, the applicant is purchasing medicines for employees as prescribed by their doctors from outside on contractual basis. They also purchase movable medical equipment at hospital. They are also paying for AMC for repair and maintenance of residential colony, hospitals and school (other than new constructions). They are also providing telephone & mobile facility at residence of officers and at hospitals. They are also paying for caretaking /housekeeping services at Guest House.

3. The Applicant, vide Annexure-I of their application dated 23.03.2018, has sought for advance ruling for eligibility of Input Tax Credit (ITC) with respect of below mentioned specific expenses occurred by the applicant:-

a. Purchase of medicines for employees as prescribed by their doctor from outside on contractual basis.

b. Purchase of movable medical equipment at hospital.

c. AMC for repair and maintenance of residential colony and hospitals and school (other than new constructions, ITC for which is blocked u/s 15 of CGST Act, 2017).

d. Telephones & Mobiles at residence of officers and at hospitals.

e. Caretaking /housekeeping services at Guest House.

3.1 The Applicant further submitted that all the above expenses are incurred for maintaining its employees. The employees are backbone for any organization for providing output services to customers/clients.

3.2 The Applicant, vide their letter dated 24.07.2018, submitted their additional submission wherein they, besides above facts, submitted that all the above expenses are incurred by Deendayal Port Trust for maintaining its employees. The employees are backbone for any organization for providing output services to customers/clients. It is not possible for any organization to do business activities without employees. Accordingly, expenses are incurred in the course and furtherance of business. Further, as directed during the personal hearing held on 12.07.2018, they have submitted the copy of the Chapter V of Major Port Trust Act, 1963 (Object clause). They further submitted that as the “Deendayal Port Trust” is carrying out its activities as per the provisions of the Major Port Trust Act, 1963 and as per the directions of ministry of shipping, there is no any Memorandum and Article of Association like in case of other organizations.

The Jurisdictional Additional Commissioner, Central Goods and Services Tax, Kutch (Gandhidham), vide their letter dated 12.04.2018 submitted that the activity/services in respect of which an advance ruling has been sought is an ongoing activity and as per record available and facts in notice, there are no such cases pending/decided in GST regime. Further, he has submitted that Section 16 of the CGST Act, 2017 which relates to eligibility and conditions for taking input tax credit. Sub section (1) of Section-16 of CGST Act, 2017 provide that “Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person.”

4.1 The Jurisdictional Additional Commissioner further submitted that Section 17 of the CGST Act, 2017 which relates to Apportionment of Credit and blocked credits and sub section (1) of Section-17 of the CGST Act, 2017 provide that “Where the goods or services or both are used by the registered person partly for the purpose of any business and partly for other purposes, the amount of credit shall be restricted to so much of the input tax. as is attributable to the purposes of his business”.

4.2 As per clear reading of Sub Section (1) of Section 16 and sub section (1) of Section 17 of the CGST Act, 2017, it is clear that a registered person is entitled to take credit of input tax charged on supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business only.

4.3 In that case, the applicant is incurring expenses for providing common facilities to their employees within the residential colony where the quarter has been given on nominal fees i.e. Hospitals, Sports Complex, garden, Guest House for official visitors and school for employee’s children and the same is not related to furtherance of their business/output service i.e. port service.

4.4 In view of the above, the Jurisdictional Commissionerate has opinioned that as per Sub Section (1) of Section 17 of the CGST Act, 2017, the applicant is not entitled to take credit of input tax charged in respect of above mentioned expenses as the same is not used in furtherance of their business.

5. We also find that the applicant is engaged in supply of port services to various clients. Said expenses are for providing common facilities to their employees within the residential colony and the same are not relates to furtherance of their business/output service i.e. “Port Service”. It is very clear from the provisions of Sub Section (1) of Section 16 and Sub section (1) of Section 17 of the CGST Act, 2017, that a registered person is entitled to take credit of input tax charged on supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business only. In view of the above, the applicant is not entitled to take credit of input tax charged in respect of above mentioned expenses as the same is not used in furtherance of their business.

6. In view of the foregoing, we rule as under –

RULING

Question 1: Whether “Input Tax Credit” with respect to specific expenses as mentioned in point 3 incurred by Deendayal Port Trust for maintaining its employees is available or not?

Answer 1: The applicant is not entitled to take credit of input tax charged in respect of above mentioned expenses, as the same is not used in the course or furtherance of his business.

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