Court :
AAR, Gujarat
Brief :
The AAR, Gujarat in the matter of M/s. Troikaa Pharmaceuticals Limited [Advance Ruling No. GUJ/GAAR/R/ 2022/38 dated August 10, 2022] has ruled that no Goods and Services Tax ("GST") is payable on the employees portion collected by the employer for providing canteen services as perquisites and paid to the canteen service provider in terms of contractual agreement, however, GST is payable on such portion, when provided to contractual workers. Further, held that Input Tax Credit ("ITC") of GST paid on canteen charges provided to employees is available when it is obligatory to provide that service to employees under any law, but it is not available on canteen services provided to contractual workers.
Citation :
Advance Ruling No. GUJ/GAAR/R/ 2022/38 dated August 10, 2022
The AAR, Gujarat in the matter of M/s. Troikaa Pharmaceuticals Limited [Advance Ruling No. GUJ/GAAR/R/ 2022/38 dated August 10, 2022] has ruled that no Goods and Services Tax ("GST") is payable on the employees portion collected by the employer for providing canteen services as perquisites and paid to the canteen service provider in terms of contractual agreement, however, GST is payable on such portion, when provided to contractual workers. Further, held that Input Tax Credit ("ITC") of GST paid on canteen charges provided to employees is available when it is obligatory to provide that service to employees under any law, but it is not available on canteen services provided to contractual workers.
M/s Troikaa Pharmaceuticals Ltd. ("the Applicant") provides canteen facility to its employees and workers, as mandated under the Factories Act, 1948 ("the Factories Act") at a subsidized rate of 50%. The canteen service is provided by a third party, who raises an invoice as per the agreed billing frequency by charging 5% GST, which is borne 50% by the Applicant and balance 50% is recovered from the employee's salary pay out.
The Applicant submitted that, the recoveries for providing canteen facility is not supply as per Section 7 of the Central Goods and Services Tax Act, 2017 ("the CGST Act") and it cannot be said that it is the 'business' of the Applicant. Further, the canteen service is made through an outside party under obligation in the Factories Act and neither had any intent to make profit or retain any profit from the amount recovered. Hence, no GST should be levied on such recovery of charges as neither the canteen service provided is an activity which is incidental or ancillary to the Applicant nor it is done in furtherance of business. Moreover, the Applicant should be allowed to claim ITC on the GST paid for such canteen service, being mandatory under the Factories Act.
The AAR, Gujarat in the matter of Advance Ruling No. GUJ/GAAR/R/ 2022/38 held as under:
"outward supply in relation to a taxable person, means supply of goods or services or both, whether by sale, transfer, barter, exchange, licence, rental, lease or disposal or any other mode, made or agreed to be made by such person in the course or furtherance of business"
"Scope of supply-
(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, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;"
"Apportionment of credit and blocked credits.
(5) Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the following, namely:-
(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, 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."
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