a. The Applicant is a pharmaceutical company engaged in business of developing, manufacturing and marketing of pharmaceutical products. The Applicant provides canteen and bus transportation facility to its employees as part and parcel of employment agreement entered between the Applicant and its employees. The Applicant recovers such costs at subsidized rates for providing canteen and bus transportation facility from its employees with respect to amount paid by the Applicant to third party service providers. Further, the Applicant also recovers specified amount from employees on account of not serving full notice period (notice-pay).
The Applicant sought advance ruling as to whether GST is leviable on recoveries collected from employees towards canteen facility, bus transportation facility and notice pay?
The Authority of Advance Rulings (AAR) ruled that the Applicant is not engaged in business of providing canteen services and bus transport facility and thus, the Applicant has not supplied any canteen services and bus transport facility to its employees in course of furtherance of business in terms of Section 7 of the Central Goods and Services Tax Act, 2017 (the CGST Act). Thus, the Applicant is not liable to pay GST on amount recovered from employees towards providing canteen facility and bus transport facilities.
Further, it has been held that employee has opted to resign by paying equivalent of month's salary in lieu of notice and has acted in accordance with contract. The resignation by the employee is not subject to any acceptance or approval and thus, employee is free to tender its resignation by making payment of notice-pay to its employer. Accordingly, it cannot be considered as breach of contract and thus, question of act of forbearance or tolerance arises when there is a breach of contract. Therefore, such recovery cannot be treated as 'consideration' within meaning of Section 2(31) of the CGST Act and accordingly, cannot be termed as 'supply' in terms of Section 7 of the CGST Act. Hence, Applicant is liable to pay GST on recoveries of notice pay from dues of employees.
Takeaway: GST not applicable on recoveries collected from employees towards canteen facility, bus transportation facility and notice pay.
[M/s Emcure Pharmaceuticals Limited, Order No. GST-ARA-119/2019-2020/B03 dated January 4, 2022 (AAR, Maharashtra)]
b. The Applicant is engaged in providing coaching services to its enrolled students under supervision through network partner. The Applicant also provides study material and student kit which would include test paper, printed material, uniform, bags and other goods.
The Applicant sought advance ruling as to whether coaching services along with material tests/papers/uniforms/bags and other goods supplied to students supplied by Applicant to be considered as 'composite supply' or 'mixed supply'?
The AAR held that supply of a package consisting of coaching service which includes goods/printed material/test papers, uniform, bags, etc. to students when supplied for a single price constitutes a 'mixed supply' as each of these items can be supplied separately and is not dependent on each other. Further, it has been held that tax liability on mixed supply is to be determined in the manner in terms of Section 8(b) of the CGST Act and thus, attracts highest rate of Tax @18%.
Takeaway: Supply of Coaching Services along with material/ test papers, uniform, bags, etc. to be considered as 'Mixed Supply'
[M/s Resonance Eduventures Limited, Order No. RAJ/AAR/2021-22/35 dated December 28, 2021 (AAR, Rajasthan)]
c. The Petitioner filed WP for quashing and setting aside order passed by department rejecting refund applications filed by the Petitioner on account of being considered as time barred.
The Petitioner argued that Order dated September 23, 2021 in Miscellaneous Application No. 665 of 2021 (Order dated September 23, 2021) passed by Hon'ble Supreme Court regarding extension of limitation period in any suit, appeals, applications or proceedings from March 15, 2020 till October 2, 2021 applies to refund applications also.
The High Court held that department is bound by Order dated September 23, 2021 of the Supreme Court and required to exclude period of limitation falling during March 15, 2020 till October 2, 2021. Since the period of limitation for filing the refund application fall between period March 15, 2020 and October 2, 2021, thus, such period stands excluded. Accordingly, Order passed by department rejecting refund application is contrary to the Order dated September 23, 2021 passed by the Hon'ble Supreme Court.
Takeaway: Extension of Limitation Period granted by Hon'ble Supreme Court vide Order dated September 23, 2021 applies to refund applications filed under GST
[Saiher Supply Chain Consulting Pvt. Ltd. Vs UOI WP (L) No. 1275 of 2021, Order dated January 10, 2022 (High Court, Bombay)]
d. The Appellant is engaged in manufacture and sale of variety of diesel engines, parts thereof and related services. The Appellant has presence in various states and accordingly, head office of the Appellant availed ITC on common input supplies on behalf of units/branch offices. Further, the cost incurred is duly recorded in its book of accounts and such cost is then allocated and recovered proportionately from each recipient unit to determine office profitability.
The Appellant sought advance ruling as to (i) whether availment of ITC on common input supplies by head office on behalf of other unit/units registered as distinct person qualifies as 'supply' and leviable to GST? (ii) In case GST is leviable, then whether assessable value can be determined by arriving at nominal value? (iii) In case GST is leviable and ITC is availed by recipient, then whether the Applicant is required to take registration as Input Service Distributor (ISD) for distribution of ITC on common input supplies?
The AAR held that availment of ITC on common input supplies by head office on behalf of other units registered as distinct person qualifies as 'supply' and leviable to GST. Further, it has been held that assessable value is required to be arrived in terms of Rule 30 of the Central Goods and Services Tax Rules, 2017 (the CGST Rules) i.e. 110% of cost of provision of services and also, required to obtain registration as ISD. Being aggrieved by the order of the AAR, the Appellant filed appeal before the Appellate Authority of Advance Ruling (the Appellate AAR).
The Appellate AAR held that activities carried out by the Appellant for providing facilitation services to its branch offices/units by way of availment of common input services by head office on behalf of units/branch would be considered as supply under Section 7 of the CGST Act as such services are provided by the Appellant's head office to its branch in course of furtherance of business. Further it has been held that cost of common input services availed on behalf of Branch Offices/Units and allocated to the Branch Offices/Units by the Head Office is not to be leviable to GST as such costs incurred by head office in capacity of a pure agent of the Branch Offices/Units and as such cost incurred by the Head Office to be excluded from the value of supply of the facilitation services. Thus, assessable value of the services provided by the Head Office to the branch offices/units to be determined in terms of second proviso to Rule 28(c) of the CGST Rules i.e. value of the tax invoice to be deemed as the open market value of services.
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