Case Law Details
In re Lear Automotive India Private Limited (GST AAR Maharashtra)
The Maharashtra Authority for Advance Ruling (AAR) has ruled that Lear Automotive India Private Limited is liable to pay Goods and Services Tax (GST) on the amounts recovered from its employees towards the provision of subsidized canteen and bus transportation facilities. The AAR also denied the company’s claim for exemption on the transportation services and input tax credit (ITC) on both canteen and transportation services procured from third-party suppliers.
Lear Automotive, a manufacturer of motor vehicle seats, sought clarification on the GST implications of recovering partial costs for canteen and transportation services provided to its employees through third-party vendors, as mandated by the Factories Act, 1948.
The AAR reiterated the stance taken in previous similar cases, stating that the recovery of costs from employees for these services constitutes a taxable supply under Section 7(1) of the CGST Act, 2017. It held that the provision of these facilities, even if subsidized, is a business activity. The transactions involve a supply from the third-party vendor to Lear Automotive and a separate supply from Lear Automotive to its employees, with the salary deductions acting as consideration. The AAR clarified that while the employer’s subsidized portion might be considered a non-taxable perquisite, the recovered amount is subject to GST.
Regarding the exemption claimed under SI. No. 15 of Notification No. 12/2017-Central Tax (Rate) for “transportation of passengers by non-air-conditioned contract carriage,” the AAR rejected it. Lear Automotive had argued that the bus service provided to its employees using hired non-air-conditioned buses fell under this exemption. However, the AAR, referencing the definition of “contract carriage” in the Motor Vehicles Act, 1988, noted that Lear Automotive was not the permit holder, did not directly charge employees on a time or point-to-point basis, and the bus routes served multiple pick-up points. This did not align with the characteristics of a contract carriage service provided by the applicant to its employees. The AAR also pointed out that hire services are excluded from this exemption. Consequently, the transportation service was deemed a taxable passenger transport service (SAC 9964).
On the issue of ITC, the AAR disallowed it for both canteen and bus transportation services. For canteen services, the AAR referred to Section 17(5)(b) of the CGST Act, which blocks ITC on food and beverages, and Notification No. 11/2017-Central Tax (Rate) prescribing a mandatory 5% GST rate without ITC for restaurant services in non-specified premises. The AAR reasoned that even if Lear Automotive ran the canteen directly due to statutory obligation, ITC would not be available.
For bus transportation services, the AAR relied on the Bombay High Court’s ruling in Solar Industries India Limited Vs Commissioner, Central Excise, Customs and Service Tax, and the Supreme Court’s decision in Toyota Kirloskar Motor Private Limited vs The Commissioner Of Central Tax. These judgments established that providing transportation to employees is a service for personal use or consumption and not directly linked to the business’s output supply, thus making the ITC ineligible under Section 17(5)(g) of the CGST/MGST Act, 2017. The AAR emphasized that this transportation is for the employees’ convenience to reach the workplace and is not a statutory obligation that would necessitate ITC.
In conclusion, the AAR ruled that the recoveries made by Lear Automotive from its employees for both canteen and bus transportation facilities are taxable under GST. Additionally, the company is not eligible for the claimed exemption on bus transportation services, and ITC on both procured services is disallowed. GST is payable on the value of the recoveries made from the employees.
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING,MAHARASHTRA
The present application has been filed under Section 97 of the Central Goods and Services Tax Act 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as “the CGST Act and MGST Act” respectively] by M/s. LEAR AUTOMOTIVE INDIA PRIVATE LIMITED, the applicant, seeking an advance ruling in respect of the following questions.
Question 1: Whether the recoveries made by the Applicant from the employees for providing canteen facility to its employees is taxable under the GST laws?
Question 2: Whether the recoveries made by the Applicant from the employees for providing bus transport facilities to its employees is taxable under the provisions of CGST Act?
Question 3: Even if GST is applicable in respect of employee recovery towards bus transportation facility, whether the Applicant would be exempted under the SI. No. 15 of Notification No. 12/2017 – Central Tax (Rate)?
Question 4: Whether input tax credit is eligible on bus transport service and canteen service procured from third party supplier to the extent the cost is borne by the Applicant?
Question 5: Even if GST is payable in respect of aforesaid employee recoveries, what would be the value on which GST is payable?
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 provision. 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, 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:
1.1 Lear Automotive India Pvt Ltd. (hereinafter referred to as ‘Applicant) is a company having its registered office at E-25, 26 & 27, Ml DC, Bhosari, Pune, Maharashtra 411026 (“Bhosari Unit”) and having its plant at No 629, Talegaon-Chakan Rd, Chakan, Maharashtra 410301 (“Chakan Unit”).
1.2 The Applicant is a company incorporated under the Companies Act, 1956, which is involved in the business of manufacturing of seats for motor vehicles. The Applicant has its manufacturing units and office located at aforesaid two locations viz. Chakan and Bhosari Units. Accordingly, the Applicant has obtained GST registration in the state of Maharashtra.
1.3 The employees are vital resources to carry out the day to day affairs from the factory and office. Accordingly, in order to carry out its business of supply of its final product and for efficient functioning of business as a whole, the Applicant is required to provide canteen and bus transportation facility to its employees. The canteen and bus transportation facility ensure that employees of the Applicant are able to reach the factory and offices in time for doing their day to day work as scheduled and to perform their work with efficiency. Therefore, the canteen and bus transportation facility are part and parcel of the employment arrangement with the employees.
1.4 The Applicant for the proper and smooth functioning of the business, employs various S various professionals/ employees for different job profiles. The Applicant follows a diligent recruitment procedure to hire its employees and on careful scrutiny recruits them. At the time of appointment, the Applicant issues an appointment letter inafter referred to as the “Employment Agreement”) to such employees, which alia contains various terms and conditions of employment, including ation, qualification, allowances, termination, notice period, etc. In addition the Application in its FIR Policy has also mentioned about the terms and tons related to work, responsibility, termination, etc.
As per the Employment Agreement, the Applicant is also recovering certain amounts from its employees for providing the transportation services to its employees. The same is evident from the salary slips of the employees wherein the express deductions that are recovered by the Applicant on account of food and bus transportation are mentioned.
1.6 Further, for the well-being and health of the employees and in accordance with the provision of Factories Act, 1948, the Applicant has introduced a Lear India Canteen and Transportation Deduction Guidelines (hereinafter referred to as ‘Canteen/Transport Policy’) wherein the Applicant will be providing quality food and refreshments to employees at subsidized rates in the company premises.
1.7 The present application is filed in respect of applicability of Goods and Services Tax (hereinafter referred to as “GST”) payable on the recoveries made by the Applicant from its employees for providing the canteen and bus transportation to its employees. canteen & Bus Transportation
1.8 The Applicant provides canteen and transportation facility to its employees at the Bhosari and Chakan Units based on the employment terms of the Applicant. Further, for providing the canteen facility to the employees, the Applicant has introduced a separate canteen policy. Based on the agreed terms between the Applicant and Employees, the Applicant is entitled to make recoveries at subsidized rates for the canteen and bus transportation facility provided by the Applicant at its factory and corporate office. The relevant clauses of the Canteen Policy are extracted below:
“GUIDELINES
Canteen
-
- Employees to avail the canteen facility as per the location defined canteen registration process.
- Deduction for the availed facility will be made as per the canteen deduction guidelines in the annexure.
- For discontinuation of the canteen services, the employee needs to inform in prior to he location admen authorities.
transportation
-
- Employees to avail the transportation facility as per the location defined transportation registration process.
-
- Deduction for the availed facility will be made as per the transportation deduction guideline in the annexure.”
- For discontinuation of the transportation services, the employee needs to inform in prior to the location admin authorities.”
1.9 Based on the above clauses of the policy, it is clear that the Applicant is providing canteen facility to its employees on subsidized rates. The charges of the meals/snacks will be deducted from the salary of the individual Mary of the employee based on his/her level.
1.10 Similarly, the Applicant is providing the transportation facility to the employees at subsidized rates. The charges for providing the said facility is also deducted from the salary of the employee.
1.11 In order to provide the said canteen and bus transportation facility, the Applicant has engaged third party service providers who are in turn providing the said canteen and bus service transportation facilities to the Applicant. Since, the said services are provided by the third party service providers to the Applicant, the service providers are raising their invoices with applicable GST to the Applicant. The Applicant is liable to pay the consideration to the third party service providers for the said canteen and transportation facilities. Thereafter, the Applicant recovers certain potion (i.e. subsidized amount is deducted from Salary on monthly basis of the cost of the canteen and bus transportation incurred by the Applicant from its employees.
1.12 The buses involved in the transportation of employees are Non-Air-conditioned (Non-AC) buses and having contract carriage permit. Further, it is important to note that the approved capacity of the bus is more than thirteen passengers.
1.13 Both the facilities i.e. canteen and bus transportation facilities are provided by the Applicant to the employees without any profit motive. In fact, the said facilities are vided at subsidized amount and forms part and parcel of the employment arrangement. The said facilities are provided merely to facilitate better working ment to the employees and does not carry intention to undertake any kind of s activity. The said facilities are towards providing hygienic food and to safety for the employees who work in the shifts as well as to maintain the tinuity in manufacturing and research & development work. The factories of the Applicant are located in remote locations. It is submitted that safety for employees and more particularly female employees is very important. Hence, the Applicant provides the bus transportation facility to ensure the safety of the employees and to provide a better working environment.
1.14 Under the aforesaid circumstances, the Applicant seeks the present advance ruling to understand whether the canteen and bus transportation recoveries made by the Applicant are taxable under the GST laws and whether the transportation facility provided to the employees in Non-AC buses having contract carriage permit would be exempted from CST? Apart from the taxability, the Applicants also seeks the advance ruling with respect to the valuation of the said recoveries from the employees. The Applicant also wishes to seek the Advance Ruling with respect to the availability of ITC in respect of input services received for providing bus transportation and canteen facility to its employees.
2. STATEMENT CONTALNING APPLICANT’S INTERPRETATION OF LAW
2.1 In order to file an application in relation to supply of goods or services before the Authority of Advance Ruling, the Applicant must satisfy the conditions prescribed under the Central Goods and Services Tax Act, 2017 (hereinafter referred to as CGST Act).
2.2. Section 95 to 106 of the CGST Act, 2017 enunciated under Chapter XVII cover Advance Ruling and its appeals. Sub-section (c) of Section 95 of the CGST Act, defines the term “Applicant’ as under: –
“Applicant” means any person registered or desirous of obtaining registration under this Act”
… Emphasis Supplied
2.3 A perusal of the above clarifies that scope of the term ‘Applicant’, as defined under sub section (c) of Section 95 of the CGST Act shall include both, the person registered under the CGST Act and also a person who is not registered as on date of applying for the advance ruling, but is desirous of seeking registration under the CGST Act, in the State where advance ruling is sought.
The applicant submits that as on date, it is registered in various States, including the State of Maharashtra and is making taxable supply of services from the same to its customers located in State of Maharashtra. Further, the turnover of the Applicant exceeds rupees twenty lakhs in the financial year. Given this, it is submitted that Applicant clearly satisfies to be ‘Applicant’ in terms of sub-section (c) of the Section 95 of the CGST Act. A copy of Maharashtra GST registration certificate is enclosed vide Appendix – 5.
2.5. The definitions and questions on which advance ruling is sought is provided under Section 95 and 97 of the CGST Act, respectively. Sub-section (1) of the Section 95 of the CGST Act defines the term ‘advance ruling’ as under: –
“(a) “advance ruling” means a decision provided by the Authority or the Appellate Authority to an Applicant on matters or on questions specified in sub-section (2) of section 97 or sub-section (1) of section 200, in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the Applicant;”
… Emphasis Supplied
2.6. Perusal of the above clarifies that the advance ruling can only be sought on the issues, as are specified under Section 97(2) of the CGST Act, which reads as under: –
Section 97. Application for advance ruling: (2) The question on which the advance ruling is sought under this Act, shall be in respect of —
(a) classification of any goods or services or both;
(b) applicability of a notification issued under the provisions of this Act;
(c) determination of time and value of supply of goods or services or both;
(d) admissibility of input tax credit of tax paid or deemed to have been paid;
(e) determination of the liability to pay tax on any goods or services or both;
(f) whether Applicant is required to be registered;
(g) whether any particular thing done by the Applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term.”
… Emphasis Supplied
2.7. In view of the above, it is submitted that an advance ruling can be sought in respect of determination of the liability to pay tax on any goods or services or both by the Applicant. In the present case, the Applicant is seeking an advance ruling to determine whether the recoveries made by the Applicant from the employees for providing food and transportation facilities is taxable under the GST laws.
2.8.Further section 96 of the CGST Act provides for appointment of advance ruling authority and reads as under :-
“section 96 subject to the provision of this chapter, for the purpose of this Act, the authority for advance ruling constituted under the provision of a State Goods and service Tax Act or Union Territory Goods and service Tax Act shall be deemed to be the Authority for advance ruling in respect of that state or Union territory.”
… Emphasis Supplied
2.9. Hence, an Advance Ruling Authority appointed by the concerned State or Union Authority Government under concerned State or Union Territory Goods and Service Tax Act, shall be the deemed to be the Advance Ruling Authority for the purpose of CGST Act. The Section 96 of the Maharashtra Goods and Service Tax Act, 2017 (hereinafter referred to as “MGST Act’), reads as under: –
‘Section 96.
(1) The Government shall, by notification, constitute an Authority to be known as the Maharashtra Authority for Advance Ruling: Provided that the Government may, on the recommendation of the Council, notify any Authority located in another State to act as the Authority for the State.
(2) The Authority shall consist of
(i) one member front amongst the officers of central tax; and
(ii) one member from amongst the officers of State tax, to be appointed by the Central Government and the State Government respectively.
(3) The qualifications, the method of appointment of the members and the terms and conditions of their services shall be such as maybe prescribed.”
… Emphasis Supplied
2.10. The Applicant submits that in terms of the above referred Section 96 of the MOST Act, the Government of Maharashtra has issued a Notification No. MGST-1017/CR 193/Taxation dated 24.10.2017, which constitutes this authority as Maharashtra Authority for Advance Ruling. The Applicant submits that by virtue of Section 96 of the MGST Act, the questions for determination in advance ruling lie before the Maharashtra Authority for Advance Ruling.
2.11 In view of the foregoing, the Applicant submits that it is eligible to file the present advance ruling application before the Maharashtra Authority for Advance Ruling, Mumbai, appointed vide Notification No. MGST-1017/CR 193/Taxation, dated 24.10.2017 read with section 99 of Maharashtra Goods and Service Tax Act, 2017.
A. Applicant interpretation with respect to the recoveries made from the employees for providing canteen facilities to its employees are provided in the below grounds which are without prejudice to each other.
1.1 the employee recoveries for providing canteen facility and also for providing bus transportation service is not covered under the ambit of “supply” under clause (a) of section 7(1) of the CGST Act.
1.1.1 In order to analyse the present issue, reference is made to Section 7 (1) of the CGST Act, which defines the term ‘supply’ as under:
7. (1) For the purposes of this Act, the expression “supply ‘ includes —
(a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;
(b) import of services for a consideration whether or not in the course or furtherance of business;
(c) the activities specified in Schedule I, made or agreed to be made without a consideration; and
(d) the activities to be treated as supply of goods or supply of services as referred to in Schedule 11.
…Emphasis Supplied
1.1.2 Section 7 (1) (a) of CGST Act defines the term ‘supply’ widely to include all forms of supply of goods or services or both such as sale, transfer, disposal, etc. made or agreed to be made for a consideration in the course or furtherance of business. Therefore, in order to constitute supply under Section 7 (1) (a) of the CGST Act, the following key elements are required to be satisfied:
(a) Supply of goods or/and services;
(b) Consideration;
(c) Course of furtherance of business.
1.1.3 It is clear from the above that in order to constitute supply under Section 7, the supply should be in the course of business or furtherance ofbusiness. The term in the “course of business ” or “furtherance of business” is not defined under the CGST Act. However, it is pivotal to appreciate hat the term “Business ” has been defined under Section 2 (17) of the CGST Act and reads as under:
section 2 (17) “business ” includes —
(a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any firer 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 dub, 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 furthemnce of his trade, profession or vocation;
(h) services provided by a race club by way of totalisator or a licence to book maker in such club; and
(i) any activity or transaction undertaken by the Central Government, a Stale Government or any local authority in which they are engaged as public authorities;
…Emphasis Supplied
1.1.4 A bare reading of the above clause (a) provides that the term “business” includes any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity whether or not it is for pecuniary benefits. Also, as per clause (b) any activity ancillary or incidental to the activities covered under clause (a) are also treated as business. Further, clause (c) also states that any activity or transaction falling in the above categories would be business whether or not there is volume, frequency, continuity or regularity in transactions. Hence, the above definition provides that business includes any activity in the nature of trade, commerce, manufacture, etc.
1.1.5 The Applicant reiterates that ‘supply’ can come into existence only when there is any activity done in the course of business or furtherance of business. It is clear from the above discussion that business means any activity in the nature of trade, commerce, manufacture, etc.
1.1.6 It is submitted that the Applicant is engaged in the business of manufacture of seats for motor vehicles and its parts. The entire business activities are aimed towards the manufacture, develop, sales, distribution, promotion of seats for motor vehicles and its parts. The Applicant also submits that while obtaining incorporation of the Applicant as a registered company under the Companies Act the Memorandum of Association (MOA) also provides that the Applicant would be engaged in manufacture of seats for motor vehicles and its pans. Reliance can be placed on the Clause No. 111 (1) which clearly provides for the same. Hence, it is submitted that the Applicant is engaged in business of seats for motor vehicles.
1.1.7 As stated above, the Applicant is providing canteen facility to the employees at the Bhosari and Chakan Unit. It is submitted that as per Section 46 of the Factories Act, 1948, every factory is mandatorily required to provide and maintain canteen in the factory in which more than 250 workers are employed. Therefore, in order to comply with the said mandatory condition, the Applicant is providing and maintaining the canteen at the factory. The Applicant is not engaged in the “business” of providing canteen facility to its employees.
1.1.8 Further, the objective of providing canteen facility at the corporate office is to provide a healthy and workable environment to the employees. The canteen facility is being provided in order to increase the working efficiency of the employees and not to undertake any business activity. The Applicant is also known in the Indian industry as well as international trade and industry as a manufacturer of seats for motor vehicles. Even in case where the said canteen facility would not be provided by the Applicant, the business of the Applicant of manufacturing of seats for r vehicles, would still be continuing.
1.1.9 As mentioned above, the Applicant is involved in the business of the–manufacturing and selling of seats of motor vehicles and providing canteen facilities to its employees is not the business of the Applicant. The canteen facility is provided by a third-party service . provider for which the third party is raising an invoice to the Applicant and charging GST on the same. Therefore, the canteen services are being provided by the third-party service provider only. The Applicant is merely acting as a conduit to provide the canteen facility.
1.1.10 Therefore, it is submitted that Applicant is not in the business of providing catering facility. Further, providing/ non-providing such canteen facility will not affect the business of Applicant in any way. Hence, the canteen facility cannot be said to be a business activity of the Applicant and hence, the provision of canteen facility to the employees cannot qualify as supply.
1.1.11 The Applicant also submits that the business of manufacturing, cooking, packing, supplying food items is strictly regulated in India under the Food Safety and Standard Act, 2006 (“FSSAI Act”), The Applicant is acting as a facilitator in the transaction between the third-party contractor and employees. Therefore, the Applicant does not hold a license to carry out food related business. Had the Applicant engaged in the business of canteen services, the Applicant would have been required to obtain registration and undertake necessary compliance under the FSSAI regulations. The relevant provisions under FSSAI Act are extracted below:
“Section 3 (1) 00 ‘Food business means any undertaking, whether for profit or not and whether public or private, carrying out any of the activities related to any stage of manufacture, processing, packaging, storage, transportation, distribution of food, import and includes food services, catering services, sale of food or food ingredients;
section 3 (1) (o) “food business operator” in relation to food business means a person y whom the business is carried on or owned and is responsible for ensuring the compliance of this Act, rules and regulations made thereunder;
1.1.12 From the above, the term “food business” means any undertaking involved in the activities related to manufacture, processing, packaging, storage, transportation and in distribution of food. It also provides that a food business operator is a person who carries or owns a food business and is responsible for carrying out the compliance of this Act, rules and regulations made under this Act. The Applicant is not involved in any of the activities mentioned above. The Applicant only enters into the contract with a third-party contractor who provides the food to the employees. The Applicant is only a facilitator in said transaction.
1.1.13 Further, according to the Regulation 2.1 of Food Safety and Standards (Licensing and Registration of Food Businesses), Regulations 2011, all the food business operators in the country will have to be registered. Since, the Applicant is not a food business operator, the Applicant is under no obligation to obtain registration and to carry out compliance of the FSSA1 Act and Rules. This also supports the above contention of the Applicant that the Applicant is not engaged in the business of canteen services.
1.1.14 In view of the above discussion, the Applicant’s business is neither a “food business ” nor the Applicant qualifies as a “food service operator”. Therefore, the Applicant cannot be said to be engaged in the business of providing canteen services.
1.1.15 The Applicant also submits that the meaning of the term business should be restricted to cover only commercial activities. Any activity which is towards providing any support or service such as helping, aiding or assisting own employees cannot be treated at par with business. In the given case in hand, the provision of canteen facility is merely a support function extended by the Applicant to the employees. Hence, the said ty cannot be equated with business.
1.1.16 In this regard, reliance can be placed in the case of State of Gujarat vs. Raipur Manufacturing Co. Ltd. (Civil Appeal No. 603 of 1966) wherein the petitioner was engaged in the business of manufacturing and selling cotton textiles. The Petitioner purchased coal for usage in business of cotton textiles. The said coal was later sold by the Petitioner. The Supreme Court held that the Petitioner was not engaged in the business of coal. The operative part of the judgement is extracted below:
“8. It is clear from these cases that to attribute an intention to carry on business of selling goods it is not sufficient that the assessee was carrying on business in some commodity and he disposes of for a price articles discarded, surplus or unserviceable. It was urged, however, on behalf of the State that where a dealer with a view to reduce the cost of production disposed of unserviceable articles used in the manufacture of goods and credits the price received in his accounts, he must be deemed to have a profit motive, for it would be uneconomical for the business to store unserviceable articles and to survive as an economic unit. But the question is of intention to carry on business of selling any particular class of goods. Undoubtedly from the frequency, volume, continuity and regularity of transactions carried on with a profit motive, an inference that it was intended to carry on business in the commodity may arise. But it does not arise merely because the price received by sale of discarded goods enters the accounts of the trader and may on an overall view enhance his total profit, or indirectly reduce the cost of production of goods in the business of selling in which he is engaged. An attempt to realize price by sale of surplus unserviceable or discarded goods does not necessarily lead to an inference that business is intended to be carried on in those_gvods, and the fact that unserviceable goods are sold and not stored so that badly needed space is available for the business of the assessee also does not lead to inference that business is intended to be carried on in selling those goods.
14.It appears from the statement furnished that coal of the value of Rs. 16,083/- was sold by the Company under 12 bills in the year 1953-54. Coal is purchased by the Company for the purpose of lighting its film:ices and heating boilers. A part of the coal purchased was sold. The Tribunal merely stated in respect of all the items of goods sold that looking to the volume and frequency of their sale, the Company should be regarded as a dealer in respect of those goods. Unless there is evidence to show that there was an intention to carry on business of selling coal, the mere fact that coal of the value exceeding Rs. 16,000/was sold will not by itself make the Company a dealer carrying on business in coal. We have no evidence on the record as to what the total quantity of the coal purchased by the Company was, and what percentage thereof was sold. No investigation has been made as to the circumstances in which the coal came to be sold. Mere sale of a commodity which a Company requires for the purpose of its business an4which has been purchased for use in that business will not ‘usti(y an inference that a business of selling that commodity was intended, unless there are circumstances existing at the time when the commodity was purchased or which have come into existence later which establish such an ••intention. It may be pointed out that the burden of proving that the Company was carrying on business of selling coal lay upon the Sales-tax authorities and if they made no investigation and have come to the conclusion merely because of the frequency and the volume of the sales, the inference cannot be sustained
…Emphasis Supplied
1.1.17 It is also submitted that as per clause (b) of Section 2 (17), business also includes any activity which is in connection with or incidental or ancillary to the activities covered under cave clause (a) of Section 2 (17) of the CGST Act. Hence, one may question as to whether the provision of canteen facility can be said to be in connection with or incidental or ancillary to the principle business of seats of motor vehicles.
1.1.18 In this regard, the Applicant submits that the connected activities or incidental or ancillary activities cannot be construed to include all activities carried out by the business. Furthermore, as per Black’ s Law Dictionary (Ninth Edition), “incidental” means dependent upon, subordinate to, arising out of or otherwise connected with (something else, usually of greater importance). Also, the term “ancillary” is defined in the Black’s Law Dictionary (Ninth Edition) as supplementary; subordinate.
1.1.19 The activities which are having direct nexus with the main business can be said to be ancillary or incidental. One of such examples of could be sale of by-products. However, canteen facility is not related to or connected with the principle business of supply of seats of motor vehicles in that manner. Hence, the same cannot be construed as incidental or ancillary to the main business of the Applicant.
1.1.20 In support of the above contention, the Applicant relies on the case of Commissioner of Commercial Taxes vs. Thirumagal Mills Ltd.[1967 (20) STC 287 Madl] In the given case, the Hon’ble Madras High t had examined the issue similar provision as below:
“4. The primary requisite of “business ” as defined even under Madras Act 15 of 1964 is that it should be a trade or commerce or adventure or concern in the nature of trade or commerce. Presence or absence of profit will not matter. But the activity must be of commercial character and in the course of trade or commerce. The second clause in the definition of “business”, as it appears to us, is still one invested with commercial character, for the reference is to any transaction in connection with, or incidental or ancillary to, such trade, commerce, manufacture, adventure or concern. Unless the transaction is connected with trade, that is to say, it has something to do with trade or has the incidence or elements of trade or commerce, it will not be within the definition. The words “in connection with or incidental or ancillary to” in the second part of the definition of “business”, in our opinion, still preserve or retain the requisite that the transaction should be in the course of business understood in a commercial sense, the intention of Madras Act 15 of 1964 does not appear to be to bring into the tax net a transaction of sale or purchase which is not of a commercial character.
5. In this case it is difficult to say that the assessee has been carrying on business in fair price shop. We have looked into its articles of association and nowhere is there any reference to the carrying on of business in fair price shop. What appears to be probable is that the assessee in order to provide amenity to its workmen has opened the fair price shop so that commodities may be made available to them at fair price. It may be that in fact profit accrues. But that is not what is material. The question is whether the assessee meant to run the fair price shop as a trade or commerce or a commercial activity. We do not find it possible to say that the fair price shop is a commercial activity of the assessee. We hold that the assessee is not carrying on the business of selling commodities in the fair price shop in a trade or commercial sense, and that, therefore, it is not with reference to the fair price shop a dealer within the meaning of the Act.
-Emphasis Supplied
1.1.21 In the case of Panacea Biotech Limited vs. Commissioner of Trade and Taxes [(2013) 59 VST 324 (Del.)) the issue was related to whether the selling of used cars is ancillary or incidental to the pharmaceutical business of the assessee. The Hon’ble Delhi High Court held that:
“11. In the present case, the main business of the petitioner is manufacture and sale of pharmaceutical products and the vehicles are used by it in the course of business (as written by Respondent No.-2 in the impugned order (Annexure A-1)).This may lead to the inference that proceeds from the sales of such vehicles should have been included in the turnover and must be taxed accordingly. But the selling This may lead to the inference that proceeds from the sales of such vehicles should have been included in the turnover and must be taxed according. But the selling price of used cars cannot by any stretch of the imagination be characterized as “ancillary or incidental to the business of a pharmaceutical company. It is not shown that the car were of a special character e.g air-conditioned vehicle especially designed to store and ferry pharmacy
products. They were purchased for use of company employees and executives, for office purposes. At the stage of purchase, they suffered sales tax, which the assessee, as buyer, was bound to pay. However, the assessee never held them for the purpose of sale and purchase, but for using them. After their use, having regard to lapse of time, and their wear and tear, the assessee decided to replace them. These cars were then sold. Their sales, in a sense are twice removed from the business of the assessee. They cannot be called “incidental’ or ‘ancillary’ to the manufacture and sale of pharmaceutical products, which the assessee is engaged in.
…Emphasis Supplied
1.1.22 Based on the above cited judgments, the canteen facility provided by the Applicant to its employees cannot be said to be principle or ancillary or incidental business activity of the Applicant. Therefore, one of the essential ingredient i.e. “business’ is missing to constitute ‘supply’ under GST. Thus, it is submitted that the said canteen facility cannot be taxed under GST.
1.1.23 Similarly, the Applicant humbly submits that it cannot be said to be in the business of transportation by providing the transportation facility to the employees at subsidized rate. The Applicant has established and evidenced that it is engaged in the business of manufacturing and sale of seats for motor vehicles. The Applicant is not engaged in the business of transportation of passengers. The Applicant does not own any vehicles that are used for the transport of its employees nor is it in possession of contract carriage permits for engaging in such transport.
1.1.24 As discussed in the foregoing paragraphs, the factories of the Applicant are located in remote locations. It is submitted that safety for employees and more particularly female employees is very important. Hence, the applicant is providing the bus transportation facility to ensure the safety of the employees and to provide a better working environment. Therefore, is submitted that the transportation facility is not the business of the Applicant.
1.1.25 It is further submitted that transportation facility provided by the Applicant to its employees is not related to or connected with the principle business of supply of seats of motor vehicles in that manner. Hence, the activity is not even incidental or ancillary to the main business of the Applicant. Hence the Applicant cannot be asked to pay GST on transport recoveries.
1.2 Without prejudice to the above, the canteen facility and bus transportation facility provided by Applicant is excluded from the scope of supply in terms of Clause (a) of Section 7 (2) of the CGST Act.
1.2.1 The Applicant also submits that the canteen facility and bus transportation facility provided by the Applicant is specifically excluded from the coverage of ‘supply’ under GST as per Clause (a) of Section 7 (2) of the CGST Act which reads as below:
“Section 7 (2) Notwithstanding anything contained in sub-section (2), —
(a) activities or transactions specified in Schedule HI; or
(b) such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council,
shall be treated neither as a supply of goods nor a supply of services”
“SCHEDULE 122
(See section 7)
ACTIVITIES OR TRANSACTIONS WHICH SHALL BE TREATED NEITHER AS A SUPPLY OF GOODS NOR A SUPPLY OF SERVICES
1. Services by an employee to the employer in the course of or in relation to his employment.
…Emphasis Supplied
1.2.2 Section 7 (2) begins with a non-obstante clause and overrides Section 7 (1) f the CGST Act. A plain reading of above section provides that even in where any activity may be treated as ‘supply’ in terms of Section 7 (1), twin activities/ transactions would still be excluded from the scope of supply .
1.2.3 Entry (1) of Schedule-Ill covers services provided by employee to its employer in the course of employment or in relation to employment. It can be noted that the any activity or transaction which is undertaken in the course of employment or in connection with employment has been specifically excluded from the ambit of supply.
1.2.4 The canteen facility is being provided by the Applicant to its employees as a part and parcel of the employment terms. Therefore, the said canteen facility is being clearly an activity which is being undertaken in the course of employment only. The canteen facility has a direct nexus with the employment of the employee with the Applicant. Therefore, by virtue of Section 7 (2) read with Entry (1) of Schedule Ill, the canteen facility does not amount to supply.
1.2.5 The canteen facility is being provided by the Applicant due to the reason that the persons enjoying the canteen facility are working as “employees” of the Applicant. Further, as already stated above, the canteen facility is being provided in the factory of the Applicant due to the mandatory requirement as per the Factories Act. Further, the canteen facility is provided not merely due to the statutory requirement, but also to provide a healthy and workable environment to all the employees of the Applicant. Therefore, the Applicant also provides the canteen facility in the Corporate office where it is not mandatory to provide the canteen facility in order to maintain uniformity for all employees of the Applicant.
1.2.6 In this regard, the Canteen Policy of the Applicant can also be referred. As per the Policy, canteen facility may be provided to the employees. It is further submitted that the Canteen Policy is a part and parcel of the employment terms and conditions.
1.2.7 As discussed in the above paragraphs, the Applicant is providing these facility to the employees due to their-agreed terms. The Applicant is recovering the subsidized amount of canteen facility to the employee in terms of the Canteen Policy. Therefore, it is clearly established that the canteen facility is directly in connection with the employment of the employees.
1.2.8 Also, as per the Press release issued by the Ministry of Finance dated 10 July 2017 which states the following:
Another issue is the taxation of perquisites. It is pertinent to point out here that the services by an employee to the employer in the course of or in relation to his employment is outside the scope of GST (neither supply of goods or supply of services). It follows therefrom 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. Further, the Input Tax Credit (ITC) Scheme under GST does not allow ITC of membership of a club, health and fitness center (section 17 (5) (b) (ii)). It follows, therefore, that if such services are provided free of charge to all the employees by the employer then the same will not be subjected to GST, provided appropriate GST was paid when procured by the employer. The same would hold Mix for free housing to the employees, when the same is provided in terms of the contract between the employer and employee and is part and parcel of the cost-to-company (C2C) ‘
…Emphasis Supplied
1.2.9 Basis the above press release, it is clear that any services provided by the employer to the employees in terms of the contractual agreement entered into between the employer and employee will not be subjected to the GST. As mentioned above, the Applicant in the present case is providing canteen facility to its employees as per the Canteen Policy. Further, the amount charged by the Applicant is fully paid to the third-party contractor and no profit or pecuniary benefit is involved in this activity. Hence, the Applicant is of the view that the provision of canteen facility is excluded from the purview of supply.
1.2.10 The above said position would be equally applicable in case of recoveries om the employees on account of providing the bus transportation facility.
1.2.11 Therefore, the Applicant humbly submits that the canteen facility and bus transportation facility provided by the Applicant to its employees cannot be treated as supply and therefore, GST should not be applicable.
1.3 Without prejudice to the above, it is settled position under GST regime that employee recoveries does not amount to ‘supply’.
1.3.1 The Applicant submits that it is a settled legal position that the employee recovery would not qualify as ‘supply’ under GST and hence, not taxable. The Applicant humbly submits that this Hon’ble Maharashtra Advance Ruling Authority has categorially held that employee recovery would not be treated as supply under GST.
1.3.2 Reliance can be placed in the case of M/S jotun India private limited, [2019-TIOL312-AAR-GSTI. In the case of Jotun, the issue before this Hon’ble Authority was whether the recovery from employee towards health insurance would be treated as supply. The Applicant in the said case was procuring health insurance services from third-party insurance service providers for its employees and the parents of its employees. The Applicant was recovering 50% of the cost incurred by the Applicant towards the parental insurance cost of its employees. This 1-lon’ble Authority vide its Order No. csr- ARA19/2019-20113-108 Mumbai dated 04-10-2019 has ruled that the employee recovery would not be treated as ‘supply’ since the activity of recovering the amount from employees does not satisfy the conditions of Section 7. The below extract of the Advance Ruling is reproduced for ready reference:
(3) The issue put forth before us is very limited. We find from the documents of insurance scheme submitted on record that the applicant provides Mediclaim cover to their employees’ parents. There are four types of category of scheme wherein sum insured amount for family floater is at Rs. 300000/-and premium amount is fixed as per the number of parent involved therein. application will hear 500 0 amount for maximum 2 members only and rest of money will be paid by respective employee. It is cashless Mediclaim insurance policy for the lock-in period of 3 years. The Mediclaim Insurance policy is made front “The Oriental Insurance Company Ltd”. Further we find from the sample copy of insurance policy submitted before us by the applicant that the applicant Initially pays the entire premium along with taxes and then recovers 50% of the premium through salary in one instalment in case of staff and in three instalments in case of operators as the case mmy be. The Applicant is not in the business of providing insurance coverage. Secondly, to provide parental insurance cover, is not a mandatory requirement under any law for the time being in force and therefore, non-providing parental insurance coverage would not affect its business by any means. Therefore, activity of recovery of50% of the cost of insurance premium cannot be treated as an activity done in the course of business or for the furtherance of business.
(4) We have referred to the term “Supply” described under Section 7 and the term ‘Business ” defined in Section 207) of the CGST Act, 2017, which are reproduced in applicant’s contenhon above. From the reading of the above definition and section (supra), we find that the activity undertaken by the applicant like providing of Mediclaim policy for the employees’ parent through insurance company neither satisfies conditions of section 7 to be held as “supply of service” nor it is covered under the term “business” of section 2(2 7) of CGST ACT 2017. Hence, we find that applicant is not rendering any services of health insurance to their employees ‘parent and hence there is no supply of services in the instant case of transaction between employer and employee.
(5) Applicant has referred the ARA order in case of M/S POSCO India Pune Processing Center Private Limited (POSCO IPPC) vide Order GST-ARA-36/2018-19/B-110 Mumbai dated 07-09-2018 2019770L-25-AAR-GST wherein . facts are identical and similar to that of the facts of applicant and ARA has ruled that, “they are not rendering any service of health insurance to their employees and hence, there i$ no supply of services in the instant case”. Considering the similar nature of facts and earlier ruling, as referred above, the same ruling is confirmed in this matter also.
(6) In view of detailed discussions above, we find that the recovery of 50% of Parental Health Insurance Premium from employees does not amounts to “supply of service under Section 7 of the Central Goods and Service Tax Act,2017
…Emphasis Supplied
1.3.3 The Applicant also invites your kind attention to the Advance Ruling in the case of M/S POSCO India Pune Processing Centre Private Limited 2019 (2) TMI 631. In the said case, this Hon’ble Authority was examining similar issue whether the recovery of 50% parental insurance premium amount from the employees would be treated as supply or not in order to avail Input Tax Credit of input services. This Hon’ble Authority vide Order No. CST- ARA- 36/2018-19/B-110 Mumbai dated 07-09-2018, has ruled that the employee recovery would not amount to supply. The relevant extract is reproduced as below:
‘ We find that the applicant is paying the premium towards Mediclaim taken for their employees and the parents of such employees. Against such payments made they are recovering 50% from their employees There is no way that the 50% amount recovered can be treated as amounts received for services rendered, since this entire amount is paid to the insurance company which is providing Mediclaim facilities to the employees and their parents. Such recovery of premium amounts by the applicant from their employees cannot be supply of services under the GST laws. in fact, what is happening in this case is that since the applicant is recovering 50% of the premium paid on Mediclaim from their employees, they want to treat the same as rendering of insurance output service to their employees and therefore they are contending that they are entitled to 100% input tax credit on the insurance premium paid to the insurance company in terms of Section I 7(5)(14(ii 0 of the COST Act, 2017, mentioned above. They have already submitted that they are primarily engaged in distribution of steel coils and also perform low value-added processing function in respect of some of the traded goods based on customer’s requirements. The applicant has brought nothing on records to show that they are an Insurance Company and registered with such authorities. Hence it appears that the applicant is creating this fiction of providing health insurance to their employees only to avail 100% ITC of payments made to the insurance companies.
Hence, we find that they are not rendering any services of health insurance to their employees and hence there is no supply of services in the instant case. Since there is no supply, we do not find the need to answer the second part of this question. In view of detailed discussions above, we find that the Applicant cannot claim input tax credit of GST charged by the insurance company..
…Emphasis Supplied
1.3.4 Similarly, reliance can also be placed on the advance ruling in the case of M/S. Tata Motors Ltd. 12020 (9) TMI 3521 wherein the applicant had sought a ruling as to whether GST is applicable on nominal amount recovered from employees for usage of employee bus transportation facility in non-AC buses. In the given case, this Hon’ble Authority vide its der No. GST- ARA- 23/2019-20/13-46 Mumbai dated 25-08-2020 categorically held that the recovery of part amount of transport costs from the employees, would not amount to ‘supply’. Relevant extract of the ruling is reproduced below:
‘5.3 The second question raised by the applicant is whether CST is applicable on nominal amount recovered fry Applicants from their employees for usage of employee bus transportation facility in non-air conditioned bus.
5.3.1 Applicant has submitted that they issue pass only to their employees, so that the transportation facility can be used by such employees, for which nominal amount is recovered on monthly basis. They have also submitted that once, employee ceases to be in employment with Applicant, he/she is not authorized to use the transportation facility. In other words, employer-employee relationship is must to avail this facility.
5.3.2 In the subject case we find that the applicant is not providing transportation facility to its employees, in fact the applicant is a receiver of such services in the instant case. The applicant’s contentions that they are eligible for exemption from GST under SI. No. 75 (12) of Notification No. 12,12017-Central Tax (Rate) dated 28.06.2077 in respect of nominal amounts of recoveries made from their employees to wards bus transportation service, is not correct. 77w exemption under the said notification is available only when the supply is taxable in the first place. In the subject case, the transaction between the applicant & their employees, due to “Employer Employee ” relation as stated by the applicant in their submissions, is not a supply under CST Act.
5.3.3 To answer the second question we now refer to Schedule to the CGST Act which lists activities which shall be treated neither as a supply of goods nor a supply of services as per clause I of the said Schedule-111, Services by an employee to the employer in the course of or in relation to his employment shall he treated neither as a supply of goods nor a supply of services.
5.3.4 Since the applicant is not supplying any services to its employees, in view of Schedule111 mentioned above, we are of the opinion that GST is not applicable on the nominal amounts recovered by Applicants from their employees in the subject case.
…Emphasis supplied
1.3.5 Further reliance is also placed on the recent decision of the Gujarat AAR in In Re: WS Tab Motors Ltd. 12021 (8) TMJ 735 – Authority for Advance Ruling, Gujarat] wherein it has been held that:
‘ GST at the hands on the applicant, is not leviable on the amount re resent in ether employees’ portion of canteen charges. which is collected by the applicant and paid to the Canteen service provider.
…Emphasis Supplied
1.3.6 The understanding of the Applicant is supported by the aforesaid rulings that the Applicant is not involved in the business of providing canteen facility. The Applicant has no intention to carry out the canteen business and the Applicant is only a facilitator in the transaction between the employee and the third-party canteen service provider. Therefore, in light of the above case laws, the Applicant submits that the canteen recovery from its employees would not amount to supply.
1.3.7 Hence, the Applicant submits that the provision of canteen facility by the Applicant to its employees through the third-party service providers cannot be said to be canteen services provided by the Applicant. Therefore, the said activity does not qualify as service and hence, GST is not applicable on the same.
1.4 Without prejudice to the above, the Applicant is eligible to claim the input tax credit on the GST paid on the cost borne by the Applicant for providing the canteen facility
1.4.1 Without prejudice to the above, it is humbly submitted that the Applicant is eligible to claim the ITC in respect of the GST paid to the caterer to the extent the cost is borne by the Applicant.
1.4.2 It is important to note that, as per Section 16 of CGST Act, a registered person shall be eligible to avail the ITC of GST paid on procurement of goods or services or both which are used or intended to be used in the course or furtherance of business. The relevant extract of Section 16 of the CGST Act is reproduced below:
16.(1) 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.
1.4.3. Section 17(5) of CGST Act, specifies the supplies in respect of which C would not be available.
1.4.4 As per Section 17(5)(b) of the CGST Act, ITC in respect of food and beverages and outdoor catering will not be available. However, as per the proviso to Section 17(5)(6) of CGST Act, input tax credit in respect of food, beverages and outdoor catering etc. will be available in case the employer is under obligation to provide the said services under any law for the time being in force. The relevant extract of the said provision is reproduced below:
(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, lift insurance and health insurance:
Provided that the input tax credit in respect of such goods or services or both shall be available where art inward supply of such goods or services or both is used by a registered person for making an outward taxable supply of the saint category of goods or services or both or as an element of a taxable composite or mixed supply;
(ii) membership of a dub, health and fitness centre; and
(iii) travel benefits extended to employees on vacation such as leave or home travel concession:
Provided that the input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force.
…Emphasis Supplied
1.4.5 In the present case, the Applicant is providing canteen facility to the employees at the Bhosari and Chakan Unit. It is submitted that as per Section 46 of the Factories Act, 1948, every factory is mandatorily required to provide and maintain canteen in the factory in which more than 250 workers are employed. Therefore, in order to comply with the said mandatory condition, the Applicant is providing and maintaining the canteen at the factory.
1.4.6 further, reliance can also be placed on advance ruling in the case of MIS. Tata otors Ltd. (supra), wherein the authority while dealing with the similar sue has expressly held that the Applicant can claim the ITC to the extent of cost borne by the Applicant. Relevant extract of the ruling is reproduced below:
“5.2.7. Therefore, in the subject case, since the applicant has specifically submitted and as agreed by the jurisdictional officer, that they are using motor vehicles having approved seating capacity of more than thirteen persons (including the driver), the applicant shall be eligible for Input Tax Credit in this case. However, we would like to make it very clear that i f the motor vehicle hired by them dots not have an approved seating capacity of more than thirteen persons (including the driver), then in that case the applicant will not be eligible for Input Tax Credit.
…Emphasis supplied
1.4.7 Thus, in light of the above, it is humbly submitted that in accordance with the proviso to Section 17(5)(b), the Applicant is eligible to claim the ITC in respect of the CST paid on the cost borne by the Applicant for providing the canteen facility to the employees as the same is mandated under Section 46 of the Factories Act, 1948.
B. Applicant’s Interpretation with respect to the recoveries made from the employees for providing Bus Transportation facilities to its employees are provided in the below grounds which are without prejudice to each other.
1.1 The employee recoveries for providing bus transportation facility is not covered under the ambit of ‘supply* under Clause (a) of Section 7 (1) of the CGST Act
1.1.1 The Applicant is procuring bus transportation facility from a third-party bus transportation service provider for transportation of its employees in Non-AC buses. Accordingly, the said service provider issues tax invoice with applicable GST to the Applicant. The Applicant is using the said bus transportation facility for transportation of its employees from place of work to home and back. Therefore, the Applicant recovers subsidized amount for the said transportation facility from its employees.
1.1.2 As discussed above, the Applicant is a company involved in the business of developing, manufacturing and marketing of seats of motor vehicles globally. Accordingly, the employees of the Applicant are engaged in developing, manufacturing and marketing of these automobile seats. It is already submitted that the Applicant is engaged in the business of seats of motor vehicles in Ground 3.1 above. The submissions of the Applicant made above equally apply in the case of Bus Transportation facility provided to the employees. Therefore, it is submitted that the Applicant is not engaged in the business of bus transportation and accordingly, the said facility provided by the Applicant to its employees does not amount to supply under the GST regulations.
1.2 Without prejudice to the above, the bus transportation facility provided by Applicant is excluded from the scope of supply in terms of Clause (a) of Section 7 (2) of the CGST Act.
1.2.1 The Applicant submits that the submission made by the Applicant in respect of canteen recovery in Ground-3.2 equally applies so far as the bus transportation is concerned. Therefore, it is humbly submitted that the bus transportation facility is specifically excluded from the purview of ‘supply’ in terms of Section 7 (2) (a) read with Schedule-Ill to the CGST Act
1.3 Without prejudice to the above, it is settled position under GST regime that employee recoveries does not amount to ‘supply’.
1.3.1 The Applicant submits that the submission made by the Applicant in respect of canteen recovery in Ground-13 equally applies so far as the bus transportation is concerned. Therefore, it is humbly submitted that the recovery towards bus transportation facility does not amount to ‘supply’ in light with the advance rulings pronounced by this Hon’ble Authority.
1.3.2 Further reliance in this regard, is placed on the advance ruling in the case of M/s. Tata Motors Ltd. (supra) wherein the applicant had sought a ruling as to whether GST is applicable on nominal amount recovered from employees for usage of employee bus transportation facility in non-AC buses. In the given case, this Hon’ble Authority vide its Order No. GST- ARA- 23/2019-20/B-46 Mumbai dated 23-08-2020 categorically held that the recovery of part amount of transport costs from the employees, would not amount to ‘ supply’. Relevant extract of the ruling is reproduced below:
‘5.3 The second question raised by the applicant is whether GST is applicable on nominal amount recovered by Applicants from their employees for usage of employee bus transportation facility in non-air-conditioned bus.
5.3.1 Applicant has submitted that they issue pass only to their employees, so that the transportation facility can be used by such employees, for which nominal amount is recovered on monthly basis They have also submitted that once, employee ceases to be in employment with Applicant, he/she is not authorized to use the transportation facility. In other words, employer-employee relationship is must to avail this facility.
5.3.2 In the subject case we find that the applicant is not providing transportation facility to its employees, in fact the applicant is a receiver of such services in the instant case. The applicant ‘s contentions that they are eligible for exemption from GST under St No. 15 (b) of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 in respect of nominal amounts of recoveries made from their employees to wards bus transportation service, is not correct. The exemption under the said notification is available only when the supply is taxable in the first place. In the subject case, the transaction between the applicant & their employees, due to “Employer-Employee” relation as stated by the applicant in their submissions, is not a supply under GST Act
5.3.3 To answer the second question we now refer to Schedule 117 to the CGST Act which lists activities which shall be treated neither as a supply of goods nor a supply of services as per clause I of the said Schedule-111, Services by an employee to the employer in the course of or in relation to his employment shall he treated neither as a supply of goods nor a supply of services.
5.3.4 Since the applicant is not supplying any services to its employees, in view of Schedule 111 mentioned above, we are of the opinion that GST is not applicable on the nominal amounts recovered by Applicants from their employees in the subject case.
…Emphasis supplied
1.3.3 In view of the above, it is submitted that there should not be any GST implications on the recoveries made from the employees for providing the bus transportation facility as a part of employment contract.
C. Applicant’s Interpretation with respect to the applicability of exemption from GST in respect of provision of Non-AC bus transportation facility to its employees.
1.1 The Applicant reiterates that the bus transportation facility provided by the Applicant to its employees are undertaken via Non-Air-conditioned (Non-AC) buses.
1.2 The Applicant submits that the transportation of employees by the Applicant through usage of Non-AC buses would merit classification under the Tariff 9964 as “Passenger Transportation Service?. It is submitted that the Annexure for Scheme of classification of services appended to Notification 11/2017-Central Tax (Rate) provides the manner for classification of services. The relevant extract of the same is reproduced below:
1.3 It is submitted that the local transportation services of passengers through buses are covered under Tariff 996411. Therefore, the local passenger transportation facility within the city in the given case in hand, if classified as service would merit classification under the Tariff 996411 only. Further, the Explanatory Notes issued by the CBIC also provides that the services provided by bus within city limits would be very well classified under Tariff 996411. The Explanatory Notes also provides that the renter defines the travel routes in case of passenger transportation services. In the given case the said conditions are satisfied. Hence, without prejudice to above submission, in case the bus employee recovery qualifies as supply of service, the said service would be classified under Tariff 9964 only.
1.4 Therefore, without prejudice to the above submissions, even in case where the bus transportation facility provided by the Applicant to its employees amount to supply, the said services would be exempted by virtue of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 (hereinafter referred to as ‘Exemption Notification’).
1.5 The Applicant further submits that as per SI. No. 15 (b) of the Exemption Notification, “Non-airconditioned contract carriage other than radio taxi, for transportation of passengers, excluding tourism, conducted tour, charter or hire” is exempt from GST. The relevant part is reproduced below:
1.6 From the above table, it is clear that, passenger transportation services via non airconditioned contract carriage, other than radio taxi is used for transportation of passenger is exempted from GST. The Applicant submits that the buses engaged in the transportation Cation of employees are Non-AC buses. It is further submitted that the buses it the given case on hand is not a radio-taxi. The Applicant also submits that the busesengaged by Applicant in the given case are registered as ‘contract carriage’. The contract carriage permit of the said buses are hereby enclosed Appendix- 7.
1.7 In view of the above discussion, the services of transportation of the employees of the Applicant through Non-AC buses would be treated as passenger transportation service classified under Tariff 9964. Further, as per SI. No. 15 (b) of the Exemption Notification, the Non-AC buses being a Non-AC contract carriage would be covered under the exemption from GST.
1.8 Thus, it is humbly submitted that even in case where the bus transportation facility amounts to service, the said supply of service by the Applicant to its employees would be exempted from GST.
D. Without prejudice to the above the Alicante is eligible to claim the input tax credit on the cost borne by the Applicant for providing the transportation facility w.e.f. 01.02.2019.
1.1 As stated in ground-5, the Applicant is eligible to claim the exemption on the transport recovery• made by the Applicant in terms of SI. 15 (b) of the Exemption Notification.
1.2 It is pertinent to note that, as per Section 16 of CGST Act, a person can avail ITC in respect of goods or services or both, which are used or intended to be used in the course or in furtherance of business. Further, Section 17(5) of CGST Act, specifics the supplies in respect of which ITC would not be available.
13 As per Section 17(5)(b) read with Section of CGST Act, ITC in respect of renting or hiring of motor vehicles which are used for the transportation of persons and having approved seating capacity of not more than thirteen persons (including the driver) will not be available. In other words, ITC on renting or hiring of motor vehicles which are used for transportation of persons and having approved capacity of more than thirteen persons will be available. The relevant extract of the said provision is reproduced below:
(5) Notwithstanding anything contained in sub-section (I) of section 16 and subsection (I) of section 18, input tax credit shall not be available in respect of the following, namely: –
(a) motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver), except when they are used for making the following taxable supplies, namely:
(A) further supply of such motor vehicles; or
(B) transportation of passengers; or
(C) imparting training on driving such motor vehicles;
(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, lift insurance and Stealth insurance:
…Emphasis Supplied
1.4 bus transportation provided by the Applicant to its employees is clearly intended to be used in furtherance of business, therefore, ITC in respect of CST paid on the cost borne by the Applicant in lieu of transportation facility will be available. Further, the same would not be barred under Section read with Section 17(5) (a) of CGST Act, as the renting or hiring of motor vehicles used for providing the transportation facility are having the approved capacity of more than thirteen person.
1.5 Further, reliance can also be placed on advance ruling in the case of M/S. Tata Motors Ltd. (supra), wherein the authority while dealing with the similar issue has expressly held that the Applicant can claim the ITC to the extent of cost borne by the Applicant. Relevant extract of the ruling is reproduced below:
“5.2.7. Therefore, in the subject case, since the applicant has specifically submitted and as agreed by the jurisdictional officer, that they are using motor vehicles having approved seating capacity of more than thirteen persons (including the driver), the applicant shall be eligible for Input Tax Credit in this case. However, we would like to make it very clear that if the motor vehicle hired by them dots not have an approved seating capacity of more than thirteen persons (including the driver), then in that case the applicant will not be eligible for Input Tax Credit.
…Emphasis supplied
1.6 Thus, in light of the above, it is humbly submitted that the Applicant is eligible to claim the ITC in respect of the GST paid on the cost borne by the Applicant for providing the bus transportation facility.
E.Without prejudice to the above. even if GST is payable by the Applicant on the canteen recoveries made. the Applicant is liable to pay the GST only on the amount of recoveries made towards providing the canteen facility.
1.1. without prejudice to the above, it is humbly submitted that even if it is assumed that the Application is liable to discharge the GST on the canteen recoveries made, the Application is liable to discharge the GST only on the amount of recoveries made on providing the canteen facility.
1.2 In this regard, reliance can be placed on press release issued by Ministry of Finance dates 10th July 2017, wherein it is clearly stated that GST will not be applicable in casefree housing is provided to the employees in terms of the contract between the employer and employee and the same is part and parcel of the cost to company. In other words, CST will not applicable, in case, any free facility provided by the employer to its employee as per the contract entered into between them and when the same is treated as cost to company. For better understanding, the relevant part of said press release is reproduced below:
7.3 ‘Another issue is the taxation of perquisites. It is pertinent to point out here that the services by an employee to the employer jn the course of or in relation to his employment is outside the scope of GST (neither supply of goods or supply of services). It follows therefrom 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. Further, the Input Tax Credit are Scheme under GST does not allow ITC of membership ofa club, health and fitness centre [section 17 (5) (b) It follows, therefore, that if such services are provided free of charge to all the employees by the employer then the same will not be subjected to GST, provided appropriate GST was paid when procured by the employer. The same would hold true for free housing to the employees, when the same is provided in terms of the contract between the employer and employee and is part and parcel of the cost-to-company (C2C)”.
…Emphasis Supplied
1.3 Based on the above understanding, it is submitted that, in case, a certain pre-decided amount of recoveries are made by the employer for providing certain facilities to its employees and rest of the non-recovered amount is treated as cost to the company, the GST will be applicable only on the recoveries made and not on the full amount charged by the supplier for providing the facility the employee.
03.CONENTION – AS PER THE RISDICTIONAL OFFICER:
3.1 Please refer to the Advance Ruling Application No. 53 of 2021 on 03.12.2021, filed by M/s. Learn Automotive India Pvt. Ltd. (GSTIN: 27AAIIFL936210 7.5) under section 97 of the CGST 2017.
3.2 M/s Lear Automotive India Pvt. Ltd. is engaged in the manufacturing and supply of seat for the motor vehicles. They are having their manufacturing units and office located separately at two locations viz. Chakan and Bhosari. In order to carry out the business of supply of its final product and for efficient functioning of business as a whole, they are providing canteen and bus transportation facility to their employees. The canteen and bus transportation facility ensure that employees of the Applicant are able to reach the factory and offices in time for doing their day to day work as scheduled and to perform their work with efficient manner. Further, for providing the canteen facility to the employees, they have introduced a separate canteen policy. Based on the agreed terms between the taxpayer and their employees, they are making recoveries at subsidized rates for the canteen and bus transportation facility provided to their employees.
3.3 In view of the above, Taxpayer is seeking an advance ruling to determine whether the recoveries made by them from their employees for providing food and transportation facilities is taxable under the CST laws. Department submissions in this regard are given below:
Q 2.1: This advance ruling is sought to ascertain whether the recoveries made by the Applicant from the employees for providing canteen facility to its employees is taxable under the GST laws and
Q 2.2: This advance ruling is also sought to ascertain whether the recoveries made by the Applicant from the employees for providing bus transport facilities to its employees is taxable under the provisions of CGST Act?
DEPARTMENT SUBMISSIONS:
As taxpayer is providing canteen and bus transportation facility to its employees. The canteen and bus transportation facilities, ensuring that their employees are able to reach the factory and offices in time for doing their day to day work as scheduled and to perform their work with efficiency. Further, for providing these facilities to their employees, they have introduced a separate canteen policy as well as bus transportation facility to their employees. Based on the agreed terms between the taxpayer and their employees, they are making recoveries at subsidized rates for the canteen and bus transportation facilities provided to their employees.
i. In this matter, kind attention is drawn to Section 7(1A) of CGST Act 2017 wherein it is started’ where certain activities or transactions, constitute a supply in accordance with the provisions of sub-section (1), they will be treated either as supply of goods or support of services as referred to inSchedule-11.4Kind attention in this matter is drawn on Sr no 5(e) of Schedule-II wherein it is stated “agreeing to the obligation to refrain t, or to tolerate an act or a situation, or to do an act” will be treated either ply of goods or supply of services.
ii. From the above foregoing facts as stated by taxpayer in their application as well as legality discussed hereinabove, it is proving that they have contractual agreement with their employees. It means their relation with their employees through agreement, are amounting to tolerate art act, which has been binding as per the agreed terms between employer and employees made during appointment of employees. Although, Sr. no. 1 of Schedule-Ill wherein it is stated ” services by an employees to the employer in the course of or in relation to his employment, which shall be treated neither as supply of goods nor a supply of services”. As the recovery made from employees is not related to services by an employees to the employer, but it is provided as a facilitation/compulsion of the employees by way of making recoveries at subsidized rates through agreement, amounting to tolerate an act, This is related to ensure that employees of the Applicant are able to reach the factory and offices in time for doing their day to day work as scheduled and to perform their work with efficiency.
iii However, this office is of view that as per Schedule I (Sec 7(1) (a)} any transaction between related persons when made in the course or furtherance of business shall be treated as supply and GST shall be leviable on such transaction. Explanation to Section 15 of the COST ACT provides the list of persons who would be considered as a related person under this act. The Applicant and its employee falls under the definition of related person by virtue of serial no (iii) of point (a) of Explanation to section 15(5) of CGST Act.
In view of the facts and legality discussed in texts of Section 7 of the Central Goods and services Tax Act, 2017 (CGST Act), for a transaction to qualify as supply, it appears to be essentially in the course or furtherance of business through agreement amounting tolerate an act. The provision of transport facility as well as canteen facility to the employees is a welfare, security and safety measure through agreement amounting to tolerate an act. Hence, this office is view that GST is leviable on amount recovered from employees on account of canteen facility and bus transportation facility through tolerate an act activity by the taxpayer.
Q2.3. Without prejudice, even if GS1. is applicable in respect of employee recovery towards bus transportation facility, whether the Applicant would be exempted under the SI. No. 15 of Notification No. 12/2017 – Central Tax (Rate)?
DEPARTMENT SUBMISSION: As their relation with their employees are amounting to tolerate an act, which has been binding as per the agreed terms between employer and employees made during appointment of employees. As such, the Applicant would not get exemption under the SI. No.13 of Notification No. 12/2017- Central Tax (Rate), as the amount is recovered under the category of amounting to tolerate an ad, not related to providing canteen and bus services, as these two things are being provided by management of canteen and transporter on behest of taxpayer, not by their employees.
Q2.4. Without prejudice to the above, whether input tax credit is eligible on bus transport service and canteen service procured from third party supplier to the extent the cost is borne by the Applicant?
DEPARTMENT SUBMISSION: ITC would be available when the inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the goods or services or both, subject to Motor Vehicle for transportation of person having approved seating capacity of not more than 13 persons (including driver of vehicle), as condition envisaged under SECTION 17(5)(a) of the COST ACT 2017.
Q2.5. Without prejudice, even if GST is payable in respect of aforesaid employee recoveries, what would be the value on which GST is payable?
DEPARTMENT SUBMISSION: The GST is discharged on the gross value of bills raised on the Applicant by their employees and the value on which GST is to be paid, needs to be determined in terms of Section 15 of the CGST Act, read with CGST Rules 2017. the above submissions are provided on the basis of the information provided by the application under Form GST ARA-01 and Annexure-1 & Annexure-II annexed and issued with the prior approval of the Pr. Commissioner.
04. HEARING
Preliminary hearing in the matter was held on 17.05.2024. Mr. Sandeep Sachdeva, Advocate, appeared and requested for admission of the application. Jurisdictional Officer Mr. Manoj Kumar, Superintendent also appeared. The application was admitted and called for final hearing on 18.12.2024. Mr. Shankar Rochlani, C.A., authorized representative, appeared made oral and written submissions. Jurisdictional Officer was not available but has made written submission. Case is heard.
05. OBSERVATIONS AND FINDINGS:
5.1 Taxation of recovery of canteen services and transportation services made from employees
5.1.1 We have carefully considered all the material on record and the relevant provisions of Law. The Applicant is before this authority for seeking clarification as to whether the recoveries made by the Applicant from the employees for providing canteen facility and transportation service to its employees is taxable under the CST laws.
(1) Lear Automotive India Pvt. Ltd. (hereinafter referred to as ‘Applicant’) is a company having its registered office at E-25, 26 & 27, MIDC, Bhosari, Rule, Maharashtra 411026 and having its plant at No 629, Talegaon-Chakan Rd, Chakan, Maharashtra 410501. It is engaged in the manufacture and sale of seats for motor vehicles.
(2) We observe that, in order to comply with the obligation under Factories Act 1948, Applicant provides canteen facility to all the workers through a third-party Canteen Service Provider.
(3) At the time of appointment, the Applicant issues an appointment letter to its employees, which inter alia contains various terms and conditions of employment, including remuneration, qualification, allowances, termination, notice period, etc. In addition to this, there is a contractual agreement with all the workers wherein it is stipulated that amount of Rs.550 per worker will be deducted each for canteen and transport facility. Further, for the well-being and health of the employees and in accordance with the provision of Factories Act, 1948, the Applicant has introduced a Lear India Canteen and Transportation Deduction Guidelines wherein the Applicant will be providing quality food and refreshments to employees at subsidized rates in the company premises. The recovery of amounts is evident from the salary slips of the employees wherein the express deductions that are recovered by the Applicant on account of food and bus transportation are mentioned.
(4) In order to provide the said canteen and bus transportation facility, the Applicant has engaged third party service providers who are providing the said canteen and bus transportation facilities to the Applicant Since, the said services are provided by the third party service providers to the Applicant, the service providers are raising their invoices with applicable GST to the Applicant The Applicant pays the consideration to the third-party service providers for the said canteen and transportation facilities. Thereafter, the Applicant recovers certain portion (i.e., subsidized amount is deducted from salary of the employees on monthly basis) of the cost of the canteen and bus transportation incurred by the Applicant from its employees.
(5) Applicant has contended that the recovery of amounts from employees for canteen services or transportation services to employees do not fall under ‘supply ‘as per section 7 of CGST Act, as supply of these services are not in the course or furtherance of ‘business’. Further, they have also taken a view that any services provided by the employer to the employees in terms of the contractual agreement entered into between the employer and employee will not be subjected to the GST.
(6) Various grounds raised by the Applicant to contend that the recovery of amounts from the employees for providing canteen and transportation services are discussed as below.
5.1.2 Whether supply of canteen and transportation services provided to employees is in the course or furtherance of business.
(1) We observe that the Applicant has argued that he is in the business of manufacture and supply of seats for motor vehicles and supply of canteen or transportation services is not his business. The Applicant has taken view that of ‘canteen services or ‘transportation services’ cannot be regarded as ‘in e 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-clauce (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, commerce, manufacture, profession, vocation, adventure, wages or any other similar activity. Thus, this clause covers these activities or any other similar activities. The last phrase ‘whether or not it is for a pecuniary ‘benefit’ widens the scope of business to include non-profit activities. Clause (b) mentions that any activity or transactions in connection with or incidental or ancillary to activities mentioned in (a) would also be included in ‘business. Clause ‘(c)’ provides that there would not be requirement of volume, frequency, or regularity of such transactions.
(2) It is an accepted fact that the Applicant is not carrying out supply of canteen services as his principal activity. No doubt his principal activity remains as manufacture and supply of seats for motor vehicles which is covered by clause ‘a of above definition. Let’s see whether the activity of supply of canteen and transportation services, falls under the definition of business, as extracted above. Clause (b) mentions that any activity or transaction incidental or ancillary to principle activity would also be included in ‘business’.
The term Incidental’ has been defined in various dictionaries as under:
Ordford Dictionary – the happening as part of something more important.
Cambridge Dictionary – less important than the thing something is connected with or part of
Dictionary.com – happening or likely to happen in an unplanned or subordinate conjunction with something else.
Similarly word ‘ancillary’ has been defined as under:
Oxford Dictionary – provide necessary support to the main work or activities of an organization.
– In addition to something else but not as important.
Cambridge Dictionary: providing support or help.
Dictionary.com – supporting, secondary, subsidiary
The reading of all above definitions clarify that any activity, which supports the main activity or necessary to carry out the principal activity, is an activity or transaction in connection with or incidental to or ancillary to the principal activity. The activity of providing food in canteen and transportation services to its workers who are pivotal to his principal activity can definitely be said to be in connection with or incidental or ancillary to his main activity of manufacture and supply off seats for motor vehicles.
(3) Further, in terms of Section 2(17) (c), as mentioned in pare (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 Application 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 service (herein after both service are referred as ‘these service’) as being supplied by the Applicant to employees for a consideration, although at subsidized rates. The Applicant pays the total consideration for the supply of these services to the canteen service provider and transport bus provider respectively and the Applicant in turn supplies these services to their employees.
(2) It is an undisputed fact that the money consideration charged, although at subsidized prices, for the supply of these services to their employees is being collected by the Applicant
(3) Therefore, it is evident on record that there are two distinct and totally different transactions in the event of supply of these services to the employees of the Applicant. They are: –
i) Supply of these services by the respective service provider to the Applicant (employer); and
ii) Supply of these services by the Applicant (employer) to their employees.
(4) In respect of the first transaction, the respective service providers have been supplying these services to the Applicant (employer) for which the said service provider receives consideration from the Applicant on which the Applicant has been paying GST to these service providers.
(4) Similarly, in the second transaction, the Applicant (employer) is supplying these services to their employees for which the Applicant is receiving consideration, although at the subsidized rate, from their employees. The respective service provider invoices the appellant for the entire services. He charges the consideration along with GST thereon. There is no privity of contract between these service providers and the employees. It is the Appellant (employer) which is providing these services to the employees. Applicant deducts certain amount from salary of the employees against this supply. Applicant makes only part of the recovery and balance cost is borne by him. Hence, the criteria of ‘business’, -consideration are met in the transaction of supply of these services by Applicant the employees. Thus, there is supply of canteen services and transportation services from the Applicant to the employees, u/s. 7 (1) of CGST Act, 2017.
5.1.4 taxability of Supply of Canteen services and transportation services to the employees
(1) Another contention of the Applicant is that the perquisites forming part of employment contract excluded from GST. As per the Circular no. 172/04/2022-GST dated 06.07.2(122 of CBIC, the relevant extract of the said circular is reproduced hereunder for ease of reference:
Thus, it is derived from Entry 1 of Schedule DI that “services by an employee to employer in the course of or in relation to his employment” shall be neither supply of goods nor supply of services. It could be seen here that Entry 1 of Schedule III y deals with ‘services by an employee to employer’, and not the other way d. Only as a corollary, the ‘services by the employer to the employee’, especially when provided in the form of perquisites, has been discussed in the CBIC Circular No. 172/04/2022 – GST dated 06.07.2022 in its para 2 mentioned above. From the above, it could be inferred that perquisites in terms of a contractual agreement between the employer and employee are not to be subjected to GST.
(2) It may be seen that in order to place any service provided by the employer to employee outside the ambit of GST, the same should be in the form of a perquisite. Though the term ‘perquisite’ has not been defined under the provisions of GST, the same is discussed under the Income Tax Act, where it has been stated in Section
17(2) as follows: –
‘perquisite” includes-
(i) the value of rent-free accommodation provided to the assessee by his employer;
(ii) the value of any concession in the matter of rent respecting any accommodation provided to the assessee by his employer;
(iii) ________
……
……’
(3) As per Income Tax Act, 1961, perquisite is defined to be the value of free benefit or facility given by the employer to his employees. The collection from the employees of whatever value, is not covered under ‘perquisite’. It could be inferred from the above, that any service rendered free of charge, or, any service rendered on a concessional basis shall qualify as a perquisite. But, it is to be noted that only the value/portion to the extent of concession offered by the employer is to be treated as a perquisite and not the remaining portion/value that has been charged by the employer. Applying the said analogy to the instant case, in respect of the canteen and transportation services provided by the applicant to its employees, it becomes clear that the exemption provided in Entry 1 of Schedule III to the CGST Act, 2017 apples only to the concession part extended to the employees and not on the value charged to the employees. Thus, the recoveries made from the employees for canteen and transportation services are liable to levy of tax.
5.1.5 The Applicant has presented following arguments in support of his stand
(1) The Applicant relies on the case of Deputy Commissioner of Commercial Taxes vs. Thirumal Mills Ltd. [1967 (20) STC 287 Mad]. M/s Thirumal Mills Ltd. is a spinning mill manufacturing cotton yarn. The issue relates to taxation of a fair price shop run by the assessee for the benefit of its employees. This case pertains to the interpretation of provisions of the Madras General Sales Tax Act, 1959. Under the said Act, liability to pay tax was upon the ‘dealer’. The Tribunal held that the assessee is not a dealer in respect of the turnover related to fair price shop. Ho/11,1e High Court confirmed this decision holding that the assessee is not dealer with reference to the transactions of fair price shop. The facts and the provisions of the law for which the said decision was pronounced are completely different than the current case.
The Applicant further relies on the decision in case of Panacea Biotech Limited vs. Commissioner of Trade and Taxes [(2013) 59 VST 524 (DeL)]. This judgment is in respect of the provisions of Delhi Sales Tax Act, 1975, wherein taxability mainly depended upon whether the person is ‘dealer’ as per the provisions of the said Act. In the said case when the cars were purchased, they were taxable at the first point i.e. w.e.f. 29.03.1996 to 02.09.2001, therefore, purchases were made after payment of Tax. When the tax is paid at the first point, subsequent sales are not to be taxed in view of provisions of the section 5 of Delhi Sales Tax Act, 1975. However, till the time cars were to be sold as used cars, they were included in the notification on which tax was to be paid at last point. No protection was provided in respect of cars which were purchased under first point regime and were sold during the last point regime from levy of tax. Thus, the fact and provisions of law in that case are different than the current case. Applicant has further quoted judgement in case of M/s Raipur Mfg Co. Vs State of Gujarat (CA No.603 of 1966). However, the facts in This case and the provisions of law involved are completely different.
(2)In this regard, we notice that the applicant has further placed reliance on the ruling of Gujarat AAR in RE: Emcure Pharmaceuticals Limited [2022-VIL-231-AAR]the ruling of Maharashtra AAR in RE: Tata Motors Limited in [2021-TIOL-197 -AAR-GST – 2020-VIL-257-AAR], the Maharashtra AAR in a ruling in RE: Posco India Pune Processing Centre Pvt Ltd (Order dated 07.09.2018), Authority for Advance Ruling, Maharashtra in M/s Jotun India Pvt Ltd (Order dated 4.10.2019), We would like to place on record that an advance ruling pronounced by the Authority or the Appellate Authority shall be binding only on the applicant who had sought it, and the concerned officer or the jurisdictional officer in respect of the applicant. Further, this authority has placed reliance on Rulings in case of Himachal Pradesh AAAR dated 26.09.2023 in case of M/s Federal-Mogul Anand Bearings India Limited, Tamil Nadu AAAR dated 05.05.2023 in case of M/s Kothari Sugars and Chemicals Limited and Tamil Nadu AAR dated 2012.2023 in case of M/s Faiveley Transport Rail Technologies India Private Limited.
(3) If incidental of ancillary supply of goods or services such as canteen or transportation services by the employer to employee were to not fall undern’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 111. 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 3.1.2 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 the Applicant to the employees.
5.2 whether the Applicant would be exempted under the SI. No. 15 of Notification 017 – Central Tax (Rate)
5.2.1Applicant has submitted that they have agreement with M/s. Supreme Facility, Management Ltd. for providing non-air-conditioned buses along with the drivers. Is. Supreme Facility Management Ltd. has raised tax invoices to the Applicant charging 12% GST to the Applicant under SAC 9966. Applicant has further used these buses for providing transport services to its employees.
5.2.2 The applicant submits that the services of employees to and from factory by non-air-conditioned buses will be covered under “transportation of passengers by non-air-conditioned contact carriages’ which is exempted from payment of tax as per SI. No. 15(b) of Notification No. 12/2017-Central Tax (Rate) dated 28.6.2017.
5.2.3 The SI. No. 15 of Notification No. 12/2017-Central Tax (Rate) dated 28.6.2017 reads as under:
5.2.4 We observe that, as per clause (b) of above SI. No. 15 of Notification No. 12/2017-Central Tax (Rate) dated 28.6.2017, the services of transportation of passengers, with without accompanied belongings, by non-air-conditioned contract carriage other than radio taxi, for transportation of passengers, excluding tourism, conducted, charter or hire is exempt from GST.
In part 2(1) of Notification No. 12/2017-Central Tax (Rate), dated 28.6.2017, the term Carriage has been defined as under:
1.t) “contract carriage’ has the same meaning as assigned to it in clause (7) of Section 2 of the Motor Vehicles Act, 1988 (59 of 1988);
In clause (7) of Section 2 of the Motor Vehicles Act, 1988. the contract carriage has been defined as under:
“(7) ‘contract carriage’ means a motor vehicle which carries a passenger or passengers for hire or reward and is engaged under a contract, whether expressed or implied, for the use of such vehicle as a wiwle 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 pith up or set down passengers not included in the contract anywhere during the journey, and includes-
(i) a maxicab; and
(ii) a nwtor-adi 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 with the application or with such modifications as it deems fit or refuse to grant such a permit:
Provided that no such permit shall be granted in respect of any area not specified in the application.
(2) The Regional Transport Authority, if it decides to rant a contract carriage permit, subject to any rules that may be made under this Act, attach to the permit any one or of the following conditions, namely: —
(i) that the vehicles shall he used only in a specified area or on a specified route or mutes;
(ii) that except in accordance with specified conditions, no contract of hiring, other than an extension or modification of a subsisting contract, may be entered into outside the specified area;
(iii) the maximum number of passengers and the maximum weight of luggage that may be carried on the vehicles, either generally or on specified occasions or at specified times and seasons;
(iv) the conditions subject to which goods may be carried in any contract carriage in addition to, or to the exclusion of passengers;
(v) that, in the case of motor cabs, specified fares or rates of fares shall he charged and a copy of the fare table shall be exhibited on the vehicle;
(vi) that, in the case of vehicles other than motor cabs, specified rates of hiring not exceeding specified maximum shall be charged;
(vii) that, in the case of motor cabs, a special weight of passengers’ luggage shall be carried free of charge, and that the charge, if any, for any lu w age in excess thereof shall be at a specified rate;
(viii) that, in the case of motor cabs, a taximeter shall be fitted and maintained in proper working order, if prescribed;
(ix) that the Regional Transport Authority may, after giving notice of not less than one month, —
(a) vary the conditions of the permit;
(b) attach to the permit further conditions;
(x) that the conditions of permit shall not be departed from save with the approval of the Regional Transport Authority;
(xi) that specified standards of comfort and cleanliness shall be maintained in the vehicles;
(xii) that, except in the circumstances of exceptional nature, the plying of the vehicle or carrying of the passengers shall not be refused;
(xiii) any other conditions which may be prescribed.
It is to be noted 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 holter 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 31er 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. Supreme Facility Management Ltd. This transaction is in the nature of rent -a-cab service. M/s. Supreme Facility Management Ltd. is charging his services of providing transport buses for carrying the employees 012% (6% SGST and 6% CGST). These invoices are raised to M/s. Lear Automotive 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. Lear Automotive India Pvt. Ltd. and charges them on monthly basis fixed amount plus 12% GST under SAC 9966. Cost of fuel is included in these charges and the buses provided are along with the drivers. It is for M/s. Lear Automotive India Pvt. Ltd. to decide as to how these buses are to be used. Thus, these services squarely fall under SAC 9966 as rented services of transport vehicles. In case of MM-I AAR-M/s. Shailesh Ramsundar Pande and RAJ AAR in case of M/s. Pawan Putra travels, the services provided by the transport service providers to the companies or organization for transportation of its employees have been held to be renting services to the company.
Let’s further analyse the compliance to conditions for a contract carriage as provided in clause (7) of section 2 of Motor Vehicles Act, 1988. We observe that
1.M/s. Lear Automotive India Pvt. Ltd. is not a holder of permit for contract carriage,
2. It is not charging passengers i.e. employees on a time basis.
3. It does not provide service to employees from one point to another. It is plying buses through various routes so as to pick up other employees.
Thus, it is difficult to infer that the Applicant is providing contract carriage ice to its employees.
Further, the hire or charter services are excluded from the said entry 15(b) of Notification No. 12/2017-Central Tax (Rate) dated 28.6.2017. In view of aforesaid discussion, the transportation services provided by the Applicant to its employees are not red by entry 15(b) of the Notification No. 12/2017-Central Tax (Rate) dated 28.6.2017. The services provided by M/s. Lear Automotive India Pvt. Ltd. squarely fall under transport of passengers under SAC 9964 and taxable at 5% without ITC or 12% with ITC (If ITC is not blocked by other provisions) under entry• No. 8 (vi) of Not. No. 11/2017 CT(R) dated 28.06.2017 as amended from time to time.
5.3 Whether ITC of tax paid to Canteen Service Provider for Canteen Services is available
5.3.1 Now, coming to the other issue which is to be decided here is, whether input tax credit (ITC) is available to the Applicant on GST charged by the service provider on the canteen facility provided to employees working in the factory.
5.3.2 Before deliberating on this issue, it would be prudent to refer to the Section 17(5)(b) of CGST Act, 2017, which pertains to blocking of 1TC:
‘Section 17(5): Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (1) of section 18, input tax credit shall not be available in respect of the following, namely: –
(b) the following supply of goods or strokes 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:
Provided that the input tax credit in respect of such goods or services or both shall be available where an inward supply of such goods or services or both is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply;
(ii)membership of a club, health and fitness centre; and
(iii) travel benefits extended to employees on vacation such as leave or home travel concession Provided that the input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force?
5.3.3 As per Section 17(5) of the CGST Act, fit on food and beverage, outdoor catering, etc is not available. However, it is seen that a proviso after sub- clause (iii) of clause of sub- section (5) of section 17 of the CGST Act is provided to clarify that the ITC in respect of such goods or services or both would be eligible where it is obligatory for an employer to provide the same to its employees under any law for the time being in force.
We observe that that Circular No. 172/04/2022-GST dated 06.07.2022 has been issued, by the CHIC, wherein clarifications on various issue pertaining to GST have been provided. In this Circular, at Sr. No3 of Pam 2, clarification has been provided on the issue as to whether the proviso at the end of clause (b) of Section 17(5) of CGST Act is applicable to the entire clause (b) or only to sub-clause (iii) of clause (b). It has been clarified that vide the CGST (Amendment Act), 2018, clause (b) of Section 17(5) was substituted with effect from 01.02.2019 on the recommendation of GST Council’s 28th meeting and accordingly, the proviso after sub-clause (iii) of Section 17(5)(b) of CGST Act, is applicable to whole clause (b) of Section 17(5). The relevant portion of above clarification is reproduced below:
5.3.4 The Applicant has submitted that they are a manufacturing unit and that there are more than 250 workers in the factory and in accordance with Section 46 of the Factories Act, 1948, it is obligatory on them to provide canteen facilities within the factory premises. Thus, in light of the above-mentioned provisions, the ITC of the GST paid in relation to canteen charges is not blocked under u/s 17(5)(b).However, the issue of eligibility of input tax credit needs to be examined further in the light of the facts of the present case and various Tax Notifications.
5.3.5 As per the provisions of the Factories Act, 1948, the Applicant has the legal responsibility to provide dr maintain the canteen. The Applicant has accordingly, instead of maintaining the canteen himself, has engaged another person, Canteen Contractor, who is providing canteen services to the workers of the Applicant on behalf of the said Applicant. The service so provided is classifiable as ‘Restaurant Service’ and liable to tax. The Restaurant Service attracts 5% of GST in terms of entry no.7 (ii) of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 which was amended by the Notification No. 20/2019-C.T. (Rate) dated 30.09.2019, effective from 01.10.2019.
5.3.6 from the facts of the case, it is clear that Canteen Contractor is providing Restaurant service to the Applicant which is chargeable to GST at 5% rate in terms of Notification No. 11/2017-Central Tax (Rate) dated 28.06.201, as amended, without t of ITC. Under explanation to the aforesaid entry, it has been clarified that accessional rate is mandatory rate and availing the normal rate of tax will not apply and that is the reason the amended Notification No. 20/2019-C.T. (Rate) dated 30.09.2019 has been issued exercising power under Section 16(1) and Section 148 of the CGST Act, 2017, so as to come out of the provisions permitting availment of ITC. In other words, a Taxpayer providing Restaurant Service has no option of taking ITC and providing Restaurant Service at normal rate.
5.3.7 Accordingly, the canteen service provider is providing the restaurant service to the workers of the Applicant on behalf the said Applicant and paying Tax at specified rate of 5% in terms of the Notification ibid. The Applicant is also recipient of service when viewed in terms of definition of recipient of service, as defined in Section 2(93)(a) of the CGST Act, 2017, which is reproduced below: –
‘(93) “recipient” of supply of goods or services or both, means –
(a) where a consideration is payable for the supply of goods or services or both, the person who is liable to pay that consideration;”
5.3.8 So in the instant case, the flow of the transaction is that the Canteen Contractor is providing service to the Applicant, which is classifiable as Restaurant Service and the Applicant himself is also providing same service to its workers as mandated in the Factories Act, 1948 i.e., he is also providing Restaurant Service to its workers. As already mentioned in pars 5.3.6, the Restaurant Service compulsorily attracts rate of 5% without ITC in a non-specified premise and the Applicant’s premises is not ‘specified premises’ in terms of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. Therefore, though the Section 17(5) of the CGST Act, 2017 does not block availment of ITC, however, in the present case, availment of ITC is barred in terms of provisions of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 as amended vide Notification No. 20/2019-C.T. (Rate) dated 30.09.2019.
5.3.9 There is another way of looking at the transactions, that, had the Applicant not engaged any Canteen Contractor but decided to run the canteen himself, as mandated in the Factories Act, 1948, then also he would be required to pay 5% GST n taxable supply without availment of arty ITC in terms of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 supra. ‘Therefore, just by engaging, a Canteen Contractor, he can’t be allowed to adopt an interpretation for availing ITC which is not available to him in a case of direct supply of Service.
5.4 Whether ITC is available to the Applicant on CST charged by the Transport Service Providers for providing the non-air-conditioned bus transportation services.
5.4.1 The services of bus transportation by the employer to his employee provided as perquisite in terms of contractual agreement entered into between the employer and his employees are in lieu of the services provided by employees to the employer in relation to their employment and will not be subjected to GST.
5.4.2 The service provider of transportation service to the Applicant is required to discharge GST on the said services. It is seen that ITC on leasing, renting or hiring of motor vehicles for transportation of passengers having approved seating capacity of more than 13 persons is not blocked u/s 17(5)(b)(i).
5.4.3 The transportation of employees by picking them from their residence to the factory or office premises is merely for personal convenience of the employees to enable them to reach the premises of the office so as to participate in the business activity.
5.4.4 Hon’ble High court of Bombay in Solar Industries India Limited Vs Commissioner, Central Excise, Customs and Service Tax held that Canvas 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 to the manufacturing activity, so as to entitle the Manufacturer, the benefit cenvatof Credit?
The view held by Hon’ble High court is produced below:
“The transportation of employees from distance of about 40 ems for reaching factory is not an activity which could be said to be a part of manufacturing activity. It is merely for personal convenience of the employees to enable them to reach the premises of the factory so as to thereafter participate in the manufacturing activity. In this regard, the reliance is placed on the judgment of the Karnataka High Court in Toyota Kirloskar Motor Private Limited vs The Commissioner Of Central TAX wherein food and beverages were provided by the appellant therein to its employees by engaging the services of an outdoor caterer. This was sought to be treated as ‘input service’ since there was a statutory duty on the appellant to establish a canteen for its employees. Considering the effect of definition of “input service’ after 01.04.2011 it was found that establishment of such canteen was primarily for personal use or consumption of the employees and after such amendment no cenvat credit could be availed. This view has been upheld by the Hon’ He Supreme Court while dismissing the Special Leave Petition on /8.11.2027 preferred by the said appellant. The facts of the present case also indicate that the facility of transportation provided by the appellant to its employees was merely in the nature of service for personal use or consumption of as employees.”
5.4.5 It is pertinent to note that the Hon’ble High Court held its view on the nature of services, under contention between taxpayer and the department, notwithstanding that they are not explicitly categorized as service for personal use or consumption of its employees under the provisions of the existing laws. Thus, we find that the ratio of court judgment is applicable in the current taxation regime and particularly to the current issue contended by the taxpayer.
5.4.6 Hired motor vehicles would be used by the applicant for provision of service of transportation of employees from residence to factory or office premises. The services of leased or hired motor vehicles are consumed for discharging obligation towards employees.
5.4.7 section 17(5)(g) of CGST/MGST Act 2017 states that input tax credit shall not be available in respect of goods or services or both used for personal consumption. Provision of service of transportation of employees from residence to factory or office premises has been used for personal consumption or comfort of employees. The applicant is not under any statutory obligation to provide these 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 invokes issued to him by the transporter for transportation of employees as per Section 17(5)(g) of CGST/MGST Act 2017.
5.5 Value in respect of which canteen and transportation services are taxable
As explained in above pares, 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 CST. 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 No. 12/2017-Central Tax (Rate) dated 28.6.2017.
2.Such a transaction in services is a non-CST supply.
3. Such services are not supply as per provisions in section 7 of CGST Act, 2017 The supply of canteen and transportation services in the nature of perquisite by the employer to the employee would not have respite from two aspects mentioned at Sr.No.1 and 2 above as the said supply is neither exempted nor a Non-CST supply. Hence, it needs to be analyzed if such services can be called as supply u/s 7.
The activity of provision of canteen and transportation services to the employees are in the course of business (as detailed in paras above). Consideration is absent or nominal. As per Section 7(1)(c), ‘the activities specified in Schedule I, made or agreed to be made without consideration have been defined to be included in supply serial Number 2 of Schedule 1 reads as below.
2 supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business: provided that gifts not exceeding fifty thousand rupees in value in a financial year by employer to an employee shall not be treated as supply of goods or services or both.
Further, Explanation to Section 15 reads as below.
Explanation. — For the purposes of this Act,— (a) persons shall be deemed to be —related persons
if– (i) such persons are officers or directors of one another’s businesses;
(i) such persons are legally recognized partners in business;
(iii) such persons are employer and employee;
….
As per a(iii)’, employer and employee are deemed to be related persons for the purposes of this Act. This means any transaction between employer and employee will not come out of ‘supply’ for the reason of not having consideration. However, respite to such transactions has come through Schedule 3. Section 7(2)(a) states that, notwithstanding anything in sub-section (1), activities or transactions specified in Schedule 1II shall be treated neither as a supply of goods nor a supply of services. Serial Number 1 of Schedule III is as below,
“1. Rents by an employee to the employer in the course of or in relation to his employment.”
This entry includes only the services by an employee to the employer. However, it has been clarified by the above referred Circular that ‘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 cement 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.
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 e 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 employer to the employees. As this part is in lieu of services of the employees to the employer which fall under schedule 3, the perquisite part is not taxable, as a corollary, deeming it to be falling in the said entry of schedule 3. Hence, though the employer and employee are related parties, the value on which tax is a liable to be paid is only the recovered amount from the employee as the remaining part of the value is the perquisite provided by the employer which is not liable to tax as discussed above.
06. In view of the extensive deliberations as held hereinabove, we pass an order as follows:
ORDER
(Under Section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)
For reasons as discussed in the body of the order, the questions are answered thus –
Question 1: Whether the recoveries made by the Applicant from the employees for providing canteen facility to its employees is taxable under the GST laws?
Answer: – Answered in the affirmative.
Question 2: Whether the recoveries made by the Applicant from the employees for providing bus transport facilities to its employees is taxable under the provisions of CGST Act?
Answer: – Answered in the affirmative.
Question 3: Even if GST is applicable in respect of employee recovery towards bus transportation facility, whether the Applicant would be exempted under the SI. No. 15 of Notification No. 1W2017 – Central Tax (Rate)?
Answer: – Answered in the Negative.
Question 4: Whether input tax credit is eligible on bus transport service and canteen service procured from third party supplier to the extent the cost is borne by the Applicant?
Answer: – Answered in the Negative.
Question 5: Even if GST is payable in respect of aforesaid employee recoveries, what would be the value on which GST is payable?
Answer: – GST is payable on the value of the recoveries made as discussed above.
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