Goods and Services Tax – GST – By: – Suriyanarayanan Iyer – Dated:- 20-4-2018 Last Replied Date:- 20-4-2018 – Canteen services under GST- an analysis of the advance ruling in Caltech Polymers Private Limited [ 2018 (4) TMI 582 – AUTHORITY FOR ADVANCE RULING – KERALA ] The Authority for Advance Ruling-Kerala has decided on 26/03/2018 that recovery of the expenses from the employees for the canteen services provided by a company would come under the definition of outward supply as defined in section 2 (83) of the CGST Act, 2017 and therefore will be taxable as a supply of service under GST. 2) The said decision is based on the interpretation of definition of business in section 2 (17) of the CGST Act by the authority and its conclusion that supply of food by the applicant company to its employees would definitely come under the phrase any activity or transaction in connection with or incidental or ancillary to sub- clause (a) occurring in sub- clause (b) ibid. 2.1) The definition of bus
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6, proof of profit-motive is unnecessary to constitute business and that the transaction of supply of food and drink to the workmen in the canteen maintained by the assessee, in pursuance of the Factories Act and the Rules, were sales and constituted business for the purposes of the Act. 2.3) The apex court decision in Burmah Shell was, though holding the field and not explicitly overruled/reversed, came to be ignored by the apex court itself in respect of cases involving sale of unserviceable spares etcetera by State Transport Corporations. In such cases, the apex court went into the dominant object of service by the State Transport Corporations and held that sale of unserviceable parts etcetera by such transport corporations cannot be subjected to sales tax/VAT. The decision of the Delhi High Court reported as Commissioner of Sales Tax Versus Delhi Transport Corporation- 1996 (7) TMI 576 – DELHI HIGH COURT discusses about the dominant object test in respect of state transport corpora
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t. 3.1) After noting the Burmah Shell decision of the Supreme Court and the Hyderabad Asbestos Cement Case approved therein, considering the subsequent decision of the Supreme Court in Northern India Caterers India Ltd- 1978 (9) TMI 154 – SUPREME COURT OF INDIA as well as the earlier decision in Raipur Manufacturing Co Ltd- 1966 (9) TMI 82 – SUPREME COURT OF INDIA, the full bench of the Madhya Pradesh High Court held that sale of food articles in the canteen were not exigible to tax. The review petition filed by the revenue against the said decision was dismissed by another three-member bench of the Madhya Pradesh High Court as per reports in 2004 SCC online MP 163. 4) A question can arise that the decisions against the revenue cited above are only in respect of VAT/sales tax on canteen sales whereas the CGST Act, 2017 is a comprehensive legislation for tax on both goods and services. 4.1) But the fact that the said CGST Act considers that services by an employee to the employer in the
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g to composite supply has to be construed ejusdem generis only. That is, only if the supply in the canteen is by way of or as part of any intended service activity /business of employer, it can fall under the definition of composite supply . Reliance is placed on the judgement of the Bombay High Court in ANK Seals Versus Employees State Insurance Corporation- 2006 (2) TMI 687 – BOMBAY HIGH COURT wherein the Bombay High Court held that the phrase in any other manner whatsoever has to be construed ejusdem generis and acquisition of the undertaking by the central government will not fall within the sweep of the said phrase occurring after transfers that factory or establishment in whole or in part, by sale, gift, lease or license . 4.2.1) Thus, the reasoning of the Advance Ruling Authority that the supply of food and other articles in the canteen run by the employer due to the mandate under the Factories Act falls under composite supply for the purposes of GST seems to be stretching the d
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