In re KSH Automotive Pvt (GST AAR Andhra Pradesh)
Introduction: The GST landscape continues to evolve, bringing about new challenges and questions for businesses. One such question pertains to the eligibility of Input Tax Credit (ITC) for food served in canteens. In a recent ruling by the Authority for Advance Ruling (AAR) in Andhra Pradesh, the question of whether a business can claim ITC on vendor invoices received towards food served in the canteen was addressed.
Detailed Analysis: The applicant, M/s KSH Automotive Pvt Ltd, engaged in auto parts manufacturing, sought clarification on whether they could claim ITC on vendor invoices for food served in their factory canteen. To analyze this situation, let’s break down the key factors:
- Mandatory Canteen Provision: As per the Factories Act, 1948 and Andhra Pradesh Factory Rules, factories with over 250 workers are required to provide a canteen facility. The applicant’s factory fulfilled this criterion, making the provision of canteen services obligatory.
- Block Credit Under GST: GST laws include certain categories of input tax credit under blocked credits, and this includes food and beverages, among others. However, a proviso under Section 17(5)(b) specifies that ITC shall be available if it is obligatory for an employer to provide such items to employees under any law in force.
- Circular Clarification: Circular No. 172/ 04/ 2022-GST dated 6th July 2022 clarified that the proviso mentioned above is applicable to the entire clause (b) of Section 17(5), thereby extending its application to blocked credit on food and beverages.
- Legal Compulsion: The applicant argued that the mandatory requirement of providing canteen services to workers under the Factories Act created a legal compulsion to do so. In light of this, they contended that they should be eligible to claim ITC on the GST charged by vendors supplying food.
Conclusion: After careful examination of the applicant’s situation and relevant laws, the AAR issued a ruling. The ruling affirmed that the applicant is eligible to claim ITC on the vendor invoices received for food served in the canteen. However, it is subject to the condition that the burden of GST has not been passed on to the employees. The ruling specified that the applicant can claim proportionate ITC for permanent employees, on food supplied by the canteen service to employees only and not to contractual workers.
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, ANDHRA PRADESH
(Under sub-section (4) of Section 98 of Central Goods and Services Tax Act, 2017 and sub- section (4) of Section 98 of Andhra Pradesh Goods and Services Tax Act, 2017)
1. At the outset we would like to make it clear that the provisions of CGST Act, 2017 and APGST Act, 2017 are in parimateria and have the same provisions in like matter and differ from each other only on a few specific provisions. Therefore, unless a mention is particularly made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the APGST Act.
2. The present application has been filed u/s 97 of the Central Goods & Services Tax Act, 2017 and AP Goods & Services Tax Act, 2017 (hereinafter referred to CGST Act and APGST Act respectively) by M/s. KSH Automotive Pvt Ltd(hereinafter referred to as applicant), registered under the AP Goods & Services Tax Act, 2017.
3. Brief Facts of the case:
3.1 M/s KSH Automotive Pvt Ltd (hereinafter referred to as appllcant”) Is engaged in the business of manufacture of auto parts and components and supplier to KIA motors. Applicant is having GST Registration number 37AAGCK8900L1Z5. The applicant provides canteen facilities to employees, through a registered person, who issued tax invoices and levies applicable GST.
4. Questions raised before the authority:
The applicant seeks advance ruling on the following:
1. Whether input tax credit is available on the canteen services
On Verification of basic information of the applicant, it is observed that the applicant is under Central jurisdiction i.e, Hindupur-2 Range, Anantapur Division. Accordingly, the application has been forwarded to the jurisdictional officer and a copy marked to the Central Tax authorities to offer their remarks as per Sec. 98(1) of CGST /APGST Act 2017.
In response, remarks are received from the Central jurisdictional officer concerned stating that no proceedings lying pending with the issue, for which the advance ruling was sought by the applicant.
5. Applicant’s Interpretation of Law:
5.1 The applicant submits that, the eligibility and conditions for taking input tax credit are specified in Section 16 of the Act, which are summarized as under:
