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GST for 'Outdoor catering' should be reduced; No GST to be levied on Sale of Motorcars to employees after use

JANUARY 18, 2018

By K Kumaresan, Vice President, Finance - Indirect Taxation, ThyssenKrupp Industries India Pvt. Ltd.

THE following Budget suggestions may be considered -

A. We have Notification number 41/2017-Central Tax(Rate) dated 14th  November, 2017 and 43/2017-Integrated Tax (Rate) dated 14th  November, 2017 which amends parent Notifications issued earlier by which for the lots of goods the rate of GST reduced from 28% to 18%. However, for the following goods rates are still continued with 28%, which needs to be brought down to 18%.

a. The goods viz., Transmission shafts (including cam shafts and crank shafts) and cranks; gear boxes and other speed changers, including torque converters; fly wheels and pulleys, including pulley blocks; clutches and shaft coupling (including universal joints) falling under HSN 8483. It look like that for these goods, the rate of GST maintained at 28% assuming that these goods are required in Automobile Industry, which is not true. These goods are used as parts of various machineries. Hence, the rate is to be reduced to 18%. If required, it is necessary to qualify in this entry that GST 28% applicable only those goods used in Automobile Industry.

b. Cement falling under HSN 2523 also kept at 28%. We as turnkey project executer required to carry out Civil Work for installing Plant and Machinery.  Keep at such high rate for Cement is also affecting our business. Hence, the rate is to be reduced to 18%.

c. Paints and Varnishes falling under HSN 3208 and 3209 and Glazier Putty, Resin Cements etc falling under HSN 3214 are also kept under 28% GST, which also needs to be reduced.

d. HSN 8716 covers Trailers and semi-trailers; other vehicles; not mechanically propelled; parts thereof attracts GST 28%. It is to be note that this entry covers Hand propelled vehicles, Animal drawn vehicles etc and its parts. For these goods, the rate of tax must be reduced to 18% GST.

e. Company like us procure new Motor Cars and gave it to employees for official use. No Input Tax credit is taken at the time of procurement. After certain period of use, these used cars are sold to the employees. In this cases, as per Notification issued on the subject matter, the cars procured before 1st  July, 2017 against which no Cenvat credit/VAT credit taken, the GST is required to be paid on 65% of the GST rate i.e., on open market value as per GST provision. This is also applicable for three years only. Even under GST regime, our company is not eligible to take GST credit.

It is, therefore, suggested that in such type of sale no GST is levied, irrespective of date of procurement of the Motor Cars.

B. At times, we despatch our finished goods for Exhibition. At present no procedure prescribed for despatching goods for Exhibition in India as well as in abroad.  Necessary procedure is to published for despatching the goods for Exhibition without payment of GST.

C. Notification number 11/2017-Central Tax (Rate) amended vide Notification number 46/2017 - Central Tax (Rate) dated 14th  November, 2017.

The rate of GST for Restaurant brought down from 18%/12% to 5% without input tax credit. However, the rate of GST for "Outdoor catering" remained to be attracting GST @ 18%. This is adding to the cost of manufacturing in manufacturing Industries  and cost of services in service Industry. The GST paid on outdoor catering is also not allowed as input tax credit. to manufacturers and service providers.

As you are aware, as per the Factories Act, 1948, the Industry employing more 250 employees needs to run a canteen to provide food to their employees. For this purposes the outdoor caterers are engaged by Industry by providing facility within the factory for cooking and serving food for the employees.  In the erstwhile Service Tax Regime, exemption provided for the outdoor catering run in a factory. Therefore the following suggestion is made for your kind consideration.

Option should be provided to outdoor caterers to pay GST @ 18% and allow them to take input tax credit or else fix GST rate as 5% without input tax credit. In this case, the service recipient should be allowed to take Input Tax Credit.


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