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Cus - Export of non-basmati rice - Notification 20/2023 insofar as it denies the benefit of the transitional arrangement as contained in para-1.05 of the FTP 2023, is bad in law: HCCus - Refund of SAD - 102/2007-Cus - Areca Nut and Supari are one and the same - Objections with regard to name, nature and status of importer or buyers or the end use of goods purchased by them etc. are extraneous: HCCX - Interest on Refund - Since wrong order annexed by petitioner in paper book, Bench is unable to proceed further - Petition is dismissed with liberty to file a fresh one: HCGST - No E-way bill - When petitioner imports machinery and after Customs clearance, transports same to his own factory, it cannot be said that such a transportation would fall within the definition of term 'supply' - Penalty imposable under second limb of s.129(1)(a): HCGST - Fix responsibility on officers who allowed BG to lapse - Petitioner not justified in not renewing BG - Cost of Rs.15 lacs imposed, to be paid to PM Cares Fund: HCGST - Since the parties agree that petition can be disposed of on the basis of records available before Appellate Authority, petitioner is directed to enclose all documents filed before Appellate Authority in a compilation, in form of a paper book: HCWrong RoadST - Whether any service is used for personal consumption or not is certainly question of fact and being question of fact, no substantial question of law arises: HCGovt proposes to amend Geographical Indication of Goods Rules; Draft issued for feedbackST - If what has been paid as tax is without authority of law, Revenue should refund the same - Denial of credit would result in the whole exercise being tax neutral: HCWarehousing Authority notifies several agri goods to be stored in only registered warehousesST - Even if the petitioner may have a case on merits, it is best left to be decided by the Appellate Authority under the hierarchy prescribed under the FA, 1994: HCUS FDA okays Eli Lilly Alzheimer’s drugGST - Petitioner challenges jurisdiction of assessing officer - Petitioner is entitled to file an appeal u/s 107 by availing an alternate efficacious remedy: HCFive from Telangana killed in car accident on Pune-Solapur HighwayGST - Existence of an alternative remedy is a material consideration but not a bar to the exercise of jurisdiction: HCHush money case against Donald Trump - Sentencing deferred to Sept 18GST - It is open to a trader to take goods by whichever route he opts, unless the law otherwise requires, destination point being intact: HCDeadly hurricane Beryl smashes properties in JamaicaGST - Conclusion that taxable person is providing a service to supplier while taking the benefit of a discount by facilitating an increase in the volume of sales of such supplier is ex facie erroneous and contrary to the fundamental tenets of GST law: HCIsrael claims 900 militants killed in Rafah since May monthGST - Order expressly records that personal hearing notice was returned with endorsement 'no such person at address' - Since petitioner has shifted to a new premises, it is just and necessary to provide an opportunity to contest demand: HC116 die in stampede at UP ’Satsang’I-T- Application for revision of order dismissed in limine on grounds of delay; case remanded for re-consideration: HCWe are deepening economic ties with India, says US officialI-T- As per Section 119(2)(b), power to condone applications relate to claims for amount exceeding Rs 50 lakhs are to be considered by CBDT; however it is impermissible for CBDT to pass order on merits: HC8 Dutch engineers build world’s longest bicycle - 180 feet, 11 inchesI-T- Additions framed u/s 68 for unexplained income & u/s 69 for unexplained expenditure not tenable where complete transactional details are furnished & not doubted: HCRailways earns Rs 14798 Crore from Freight loading in June monthI-T- Delay in filing ITR is per se insufficient reason to estimate assessee's profit @15% on turnover, more so where audited financial report is filed in timely manner: ITATMoD inks MoU to set up testing facilities in Unmanned Aerial System in TN Defence Industrial CorridorI-T- For invoking section 69A, assessee should be found to be owner of any money, bullion, jewellery or other valuable article & which is not recorded in the books of account: ITATGovt proposes Guidelines for ethical approach to Coal MiningI-T- TDS credit can be allowed based on AIS, where details pertaining to TDS, advance tax & other payments are reflected in Form 26AS: ITATVaishnaw to inaugurate Global IndiaAI Summit 2024I-T- Lending money with the primary intention of earning interest can be considered a business activity, but nature and manner of lending, as well as the frequency, should be taken into account: ITAT
 
Treading GST Path XLIII - Advance Ruling on Canteens - The Pandora's (tiffin)box

 

APRIL 12, 2018

By G Natarajan, Advocate, Swamy Associates

THE decision of the GST Advance Ruling Authority, Kerala [Caltech Polymers Pvt. Ltd. - 2018-TIOL-01-AAR-GST, to the effect that the cost recovered from employees, by the employer, towards using the canteen facility provided by the employer is a "supply" and hence liable to GST, has kicked up large scale debates throughout the country. It is seen that some of the vital arguments, which could have been advanced before the Authority, seems to have been not advanced.

It may be noted that as per the provisions of various enactments such as, the Factories Act, the employer is bound to provide canteen facility to the employees. While some of the employers provide free food, by and large subsidised food is being provided to the employees in such canteens. Provision of such facility, either free food or subsidised food is in the form of perquisites in the hands of the employee, for the services provided by the employee to the employer. It cannot be treated as an independent supply by the employer to the employee.

Reference is also invited to the Press Note dated 16 July 2017 issued by the Government, containing the following clarification, which signifies the intention of the Government.

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.

As per S.No.1 of Schedule III of the CGST Act, 2017, services provided by the employees to the employer are not considered as supply and hence, the subsidised food provided by the employer to the employee, by way of consideration for the services provided by the employee, cannot be subjected to GST levy.

The decision of the Advance Ruling Authority would give rise to the following issues.

It may be noted that employers and employees are treated as related persons, as per Section 15 (5) of the CGST Act, 2017. As per S.No. 2 of Schedule I of the Act, supply of goods are services between related persons, made even without consideration would be a supply. So, even if the employer provides free food to its employees, as per S.No.2 of the Schedule I of the Act, it may be considered as a supply. Since the parties are related, valuation in such case, be it free supply or subsidised supply, shall be determined as per Rule 28 of the CGST Rules, 2017, i.e. based on "open market value" or by any other method prescribed in Rules 28 to 31 ibid. All this would lead to unimaginable consequences.

It is strongly felt, with due respect, that the impugned decision of the Advance Ruling Authority is duly appealed against. Or, in order to put at rest the controversies, the Government may clarify the issue in more clear terms.

(The views expressed are strictly personal.)

(DISCLAIMER : The views expressed are strictly of the author and Taxindiaonline.com doesn't necessarily subscribe to the same. Taxindiaonline.com Pvt. Ltd. is not responsible or liable for any loss or damage caused to anyone due to any interpretation, error, omission in the articles being hosted on the site)

 


 RECENT DISCUSSION(S) POST YOUR COMMENTS
   
 
Sub: Whether its supply at all is the question

Hi Natarajan,

Schedule III of CGST Act states that services provided by an employee to employer are neither supply of goods nor services. In other words the legislative intent was to keep the services of an employee under an employment contract out of the purview of GST. Now if the employee, as a part of his employment contract receives certain statutory or obligatory benefits like subsidized food in terms of Factories Act, insurance coverage in terms of ESI Act, conveyance (IT/ITES sector companies are required to provide conveyance at night and most of the companies owing to their distance from the cities or towns provide conveyance to their employees), the cost of such benefits extended by the employer to the employee (if any subsidy is borne by the employer) is regarded as cost to company.

The services per se, i.e. subsidized canteen, insurance, conveyance are actually provided by third parties arranged by the employer (rarely by employer himself and even if its by employer it does not alter anything) and the costs incurred are recovered from the employees by the employer, usually through salary deductions and consolidated amounts are paid to the third party service providers. These recoveries will be accounted by the employer and adjusted against the expenditure incurred by the employer for payments made to the service providers.

The entire arrangement is part of the employment contract and as stated above any additional expenditure borne by the employer will be regarded as cost to the company by the employer. Where is the question of this being regarded as supply as envisaged under section 7 read with respective Schedules. It was naïve on the part of AAR to not consider or comprehend how employment contracts work or was there deficiency in the arguments put forth by the party's representative, and the result was a disaster creating unwarranted panic throughout the country. Government should also keep all such perks, benefits etc. provided by employers to employees out of the purview of GST and revise the law accordingly. Its shocking to say the least that government and tax authorities is looking for revenues treating these activities as supplies.

Last but not the least, a piece of advise to the Govt. AAR as an institution in GST needs a thorough revamp. Two Joint Commissioners deciding the fate of an activity, assessee and the country is plain stupid. And imagine AARs in each of the States. Let there be a Principal Bench at Delhi and regional benches in different zones - north, east, west, south and central. Each of these regional benches to be headed by a HC judge and the Principal Bench by a SC judge. It should not be manned by junior officers of the tax department - its a joke. Hope the Finance Ministry, CBIT will wake up and smell the coffee.

Regards,
Santosh Hatwar
Tax Lawyer

Posted by santosh hatwar
 

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