GST
TRT-2025-
AAR Uttarakhand
Date:-22-12-23
In:-
Issue Favourable to Tax Payer ?:-
Order Date – 22 December 2023
Facts –
- The Applicant, M/s Tube Investment of India Limited, have entered into agreement with the contractors to operate canteen within the factory premises to provide food to their employees. They recover nominal amount from the employees on monthly basis and such recoveries are shown as a deduction in the monthly slip of the employees.
- They do not avail input tax credit (ITC) on the expenses incurred on the services provided by the canteen service provider. They discharge GST @5% on the cost of the canteen service provider total taxable value plus 10% notional mark up.
Issue –
- Whether the GST is applicable on the amount recovered from the employees and whether input tax credit (ITC) is available to the applicant?
Order –
- The AAR observed that the applicant has established canteen facilities as mandated under Factories Act, 1948 and supplies food at a cost through third-party-vendor and that the supply of food by applicant is 'supply of Service' to their employees, as the same is not a part of the employment contract and the canteen facility is provided as mandated under Factories Act.
- The cost although nominal is recovered from the salaries as deferred payment is 'consideration' for the supply and GST is liable to be paid. The Kerala Authority of Advance Ruling, Kerala in the case of Caltech Polymers Pvt. Ltd., held that if the company’s canteen services are covered under "outward supply" under section 2(83) of the Central Goods and Services Act, 2017, GST will be payable on food expenses collected from employees.
- 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 worker, as mandated in the Factories Act, 1948 i.e. he is also providing a Restaurant service to its worker. The Restaurant Service compulsorily attracts GST rate of 5% without ITC, in a non-specified premises and the applicant's premises is not a specified premises in terms of Notification No. 11/2017- central Tax (Rate) dated 28.06.2017.
- Therefore, though the section 17(5) of the GGST Act, 2017, does not debar availment of ITC in entirety, but in the present case availment of ITC is debarred in terms of provisions of Notification No11/2017- central tax (Rate) dated 28.06.2017 as amended vide Notification No. 20/2019- C.T. (Rate) dated 30.09.2019.
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