In Re: M/s. National Aluminium Company Ltd., (NALCO)
GST
2018 (10) TMI 748 – AUTHORITY FOR ADVANCE RULING, ODISHA – 2018 (18) G. S. T. L. 508 (A. A. R. – GST)
AUTHORITY FOR ADVANCE RULING, ODISHA – AAR
Dated:- 28-9-2018
ARN 02/ODISHA-AAR/2018-19
GST
SRI ANAND SATPATHY, AND SRI NILANJAN PAN, MEMBER
Present for the Applicant: P.K, Sahu, Advocate
Subject: GST Act, 2017-Advance Ruling in respect of entitlement to take credit of input tax paid on various goods and services used for maintenance of applicant's township, guesthouse, hospital, horticulture in its ordinary course of business.
1.0 M/S National Aluminium Company Ltd., Nalco Bhawan, PO. Nayapajli, Bhubaneswar- 751013 (hereinafter referred to as 'Applicant') assigned with GSTIN number 21AAACN7449M1Z9 have filed an application on 19.07.2018 under Section 97 of CGST Act, 2017, OGST Act, 2017 read with Rule 104 of CGST Rules 2017 & OGST Rules,2017 in Form GST ARA-01 seeking an advance ruling in respect of its e
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(Odisha) for production of aluminium cold rolled sheets and coils. As part of its business, it is having townships at Damanjodil Angul and residential colony at Bhubaneswar. It runs hospitals at Damanjodi and Angul for its employees. It also has guest houses for touring employees and guests. The applicant is receiving various services of repair and maintenance in the townships, guest houses, hospitals and horticulture which are received as part of its business operations. The suppliers of such services are charging GST in their invoices.
2.1 That services of management, maintenance and repair in its townships, guest houses, hospitals and horticulture are being used in the course or furtherance of the applicant's business and, therefore. it is entitled to take credit of tax paid on such services as per the provisions of central Goods and Service Tax Act, 2017.
2.2 That it serves the business interest of the applicant having its employees residing in townships and colonies near its fac
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onal Hearing was fixed on 29.08.2018 under due intimation to the applicant, the jurisdictional officer of State GST & jurisdictional officer of Central GST (intimated through their respective Commissionerate along with a copy of application and the written submission of the applicant). The applicant appeared through its Advocate (Sri .P K Sahu) and Representative( Sri P.Suna, DGM, Nalco) and the jurisdictional officer of State GST & jurisdictional officer of Central GST appeared in person. Sri P. K. Sahu, Advocate re-iterated the submissions already furnished in the annexures to the application. During personal hearing, the applicant was asked to state a) whether the applicant is into the supply of Health Service, Dwelling/Accommodation service etc b) whether maintenance of township, Guest house, Hospital for the welfare of the employees would be a supply between related parties. Since the said issues were not clarified/explained properly by the applicant the case was adjourned and nex
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hit/blocked by sub-section (2) or sub-section (5) of Section 17.
3.1 In the course of hearing Sri. Sahu, relying upon some judicial pronouncements also explained that establishing residential colony and guest houses and maintaining them was very much necessary and has direct nexus with the core business of aluminium manufacturing. On the other hand, the applicant cannot be held as the supplier of dwelling service or health service to its employees through the residential colonies, guest houses and hospitals since the facilities so provided are without any consideration receivable from the employees (beneficiaries). The facilities so provided are rather part of the CTC (Cost to the Company). It was also averred that the hospital infrastructure has been created in lieu of EIC contribution. It is thus a statutory obligation under the EIC Act discharged by establishing the hospital and maintaining the same. Thus, the services provided through establishment and maintenance of the residenti
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entitled to take input credit of tax paid on various goods and services used for maintenance of applicants's township, quest houses hospitals and horticulture for paying output tax”.
4.2 The moot issue before us is to decide and to give a ruling on whether the applicant is entitled to take input credit of tax paid on various goods and services procured for use in maintenance of the townships, guest houses, hospitals and horticulture established by the applicant. In fact, ruling on entitlement of input tax credit should be transaction specific and it should not be generalized of course, the applicant has submitted a list of contracts (56 in number as listed in Annexure-A) entered into with different suppliers of goods and services for supply in relation to maintenance of the townships, guest houses, hospitals including horticultural maintenance- At the time of hearing, it was given to understand by the applicant that the list is merely illustrative and not exhaustive meaning thereby th
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, Nalco Damanjodil Mass plantation for the 2017-19 at M&R Complex, Nalco Damanjodi and raising of seedlings for the 2015-17 at Nalco. The services listed at Sl. No.01, 02, 40, 47, 48, 49, 50 and 51 are services availed or to be availed exclusively for the residential colony. Service listed at Sl No.41 and 42 i.e. maintenance and up keeping of GET hostel and maintenance of the equipments in “Shaiia Niwas” is used partly for residential accommodation for trainee engineers and partly for the general guest house. Services listed at SI.No.52, 53,56, 43, 44, 45, and 46 are clear non-business activities. In fact the aforesaid services relate to plantation in different areas outside the business area of the applicant. This includes urban plantation in Koraput and other similar plantation activities in other areas. These are certainly not in the course of nor in furtherance of the core business of the applicant i.e. mining of bauxite, refining or manufacturing aluminum ingot. Some of the activi
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sted at Si No .03 is being availed exclusively for residential colony. Services listed at Sl No.37 and 38 are intended exclusively for the hospital and services listed at Sl No.04 and 09 are partly for residential colony and pertly for the plant area. Services listed at S! No.07 i.e. O&M of the “solid waste treatment plant” seems to be for treating the solid wastes of the plant and plant area. The service listed at Si No .08 i.e fogging operation seems to be for the residential colony. Thus, the services classified under this category are found to have been availed partly for residential colony maintenance, partly for hospital maintenance and partly for plant maintenance.
iii) Sweeping and snow removal services- Road sweeping work in Nalco Township, Sector i, ii & iii and Saheed Laksman Nayak colony, sweeping work at plant administration building, surakshya vihar, Dr Ambedkar colony. The services listed at SI No.05 is clearly for sweeping work in Nalco township i.e. for maintenance o
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nt and township at Nalco, Damanjodi, lightning maintenance of alumina plant and township at Nalco, Damanjodi, maintenance of 132 kv switchyard, grid transformer and power distribution system of at Nalco, Damanjodi. The services listed at Sl No. 11, 12, and 13 are in relation to the residential quarters. Service at SI No. 14 15 and 16 is in relation to Alumina Plant. The services listed at SI No.17, 18, 19, 21 and 22 are in relation to the Nalco township end residential colony. The service listed at Sl No.20 is in relation to the Alumina Plant. The service listed at Sl No.23 i.e. provision of drinking water at picnic spot is not at all in the course of or for the furtherance of business. The service listed at Sl No.29 is in relation to the residential colony whereas the service listed at S' No.30 i.e. lighting maintenance of Alumina Plant township at Damnajodi is partly in relation to the plant and partly in relation to the residential colony. The service listed at Si No 31 i e AMC
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Homeopathy, Urani, Aurveda, Natureopathy and Acupuncture Contract for Pharmacy outlet of Nalco Hospital, Nalco Township, M&R Complex, Damanjodi. The contracted service listed at Sl No.36 is for running the pharmacy outlet. As it appears the only activity under this will be to dispense health service by way of providing medicine mainly to the employees. This is a clear case of supply of medicine and other allied pharmaceutical items free of charge or, in other words, frees distribution of medicines.
viii) Maintenance and repair services of machinery and equipments-Maintenance of LPG system of Shaila Niwas, Transit House, Damanjodi. The said service is listed at Si No,39. As the heading suggests it is for use in the transit house and GET Hostel. Such establishments are essentially business establishment and not created for use only by the employees.
4.4. The contention of the applicant is that they are having township at Angul, Damanjodi and Bhubaneswar. They run hospitals for their
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air work of the township, guest house, hospital etc. for the following reasons.
a) The input and/or input services received by the applicant for the activities such as maintenance and repair of the townships, guest houses, hospitals and horticulture have no nexus to the manufacturing activity undertaken by the applicant. The said activities are neither relating to business nor relating to manufacture of final product and its supply. The said activities may be welfare activities undertaken while carrying on the business but to qualify as input service; the activity must have nexus with the business of the applicant. The expression “in course or furtherance of business” appearing in Section 16(1) of the GST Act refers to activities which are integrally related to the business activity and not welfare activities.
b) The activity of maintenance and repair of applicant's residential township / colony, guest house, hospitals including the horticultural activity are broadly used by the
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entation, and Mechanical Engineering activities, under works contract basis. Taken together, these are activities of repair and maintenance of immovable property like land, building and any other civil structures. Similarly, the assets contained in any guest house cover building, furniture, electrical appliances like TV, refrigerator, air conditioning machines, electrical cocking appliances, electrical fittings and lawns and gardens. The prime purpose of maintenance of guest house for touring employees is welfare. The services for repair and maintenance of building and land of any guest house are primarily done by service providers to whom jobs are awarded under works contract terms. The assets contained in any hospital or dispensary generally covers building, lawns, gardens, parking place, medical instruments, hospital beds and fittings, vehicle and ambulance, furniture, electrical appliances like refrigerator, air conditioning machines, electrical fittings etc. The hospital or dispen
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nation thereto under sub-section (5) of section 17 the tax credit on “works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service” is not allowed or blocked. Further, the tax credit on “goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business” is blocked. From a plain reading of the provisions of the above referred sub-clauses along with the Explanations, it reveals that the tax credit on input and/or input services received by the applicant for the referred activities are in the form of works contract service, for repairs and maintenance of various immovable property and assets, the input tax credit of which are directly restricted or blocked under specific provision un
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efit of the credit of the tax paid on the input and/or input services received for the referred purposes as per its application.
5.0 On scrutiny of the services listed by the applicant against which the present ruling has been sought, we find that the listed services are being availed for different purposes as observed in para-48 above. As per our findings, some of the services are exclusively in relation to the residential colony, some are in relation to the plant, some are in relation to the guest house and transit house, some are for use in residential colony as well as in the plant while some of the services like urban plantation, provision of drinking water at picnic spot, raising of seedling, and general plantation are neither for the plant nor for the residential colony. The applicant might be doing those activities while discharging some obligation but such activities are not for or in relation to the core business. Some other activities like contract for running a pharmacy o
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17 by the CBIC, it was clarified that perquisites provided to employees in terms of employment contract are not chargeable to GST. In the said press release it was also clarified that gifts of value exceeding Rs. 50,000/- by the employer to an employee will constitute a supply chargeable to GST. Conversely, in Para I of Schedule III of the Act, it has been made clear that service by an employee to the employer in the course of or in relation to his employment is neither a supply of goods nor a supply of service. There is no converse provision i.e. services provided by an employer to the employees in Schedule III implying thereby services provided by an employer to its employees are supply of services. Possibly, for this confusion, the clarification dated 10th July, 2017 was warranted to clarify that perquisite provided by an employer to an employee in terms of the employment contracts are not chargeable to GST. On the other hand, as per the provisions in Schedule I Para 2 read with the
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residential colony shall not qualify for input tax credit in terms of Sub-section 2 of Section 17. Detailed observation in respect of each work order issued by the applicant for availing different services has been made in para-4.3.
5.1 Establishment of hospitals and maintenance thereof may be for discharging the statutory obligation under the ESI Act by the employer, but dispensing medical service to the employees and others is a supply of service by the employer (the applicant in this case). Such service being nil rated will fall under exempt supplies. Consequently, the inputs and input services received by the applicant for dispensing the exempt service will not qualify for input tax credit in terms of Section 17 (2) of the OGST/CGST Act. It is made clear that the ruling to be issued is based on the current provisions of law. For the sake of further clarification we consider it appropriate to discuss the amendment of Section 17 (5) as brought in the CGST (Amendment) Act, 201 8(yet
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guest houses including landscaping by way of gardening or otherwise is neither a perquisite nor a statutory obligation. It is purely for providing accommodation service to guests including employees on tour. This is in fact a business requirement to maintain such facilities and accordingly the applicant is entitled to input tax credit of the tax paid on inward supply of input and input services for maintenance of the guest house, transit house, and training hostels, but excluding the food and beverages provided in such establishments. Credit of such input services are as such blocked in clause b of Sub section 5 of section 17 of the OGST and CGST Act. In the case of the applicant, the listed services do not contain any catering service, but the application seeks for a ruling even on such service, It is further clarified that, the applicant might not be charging anything from the guest or the trainees for providing food and beverages in the guest houses and training hostels and in such
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esidential colony and in turn part of the perquisite provided to the employees. Services availed in relation to the plants and garden in the residential colony will not qualify for input tax credit for the reasons discussed in para 5.0. It was also found that the plantation and maintenance of gardens are undertaken within plant area and other business establishments like administrative building and guest houses. Services availed in relation to plantation and gardening within the plant area including mining area and the premises of other business establishment as mentioned above will qualify for input service credit Observations on specific contracts as listed in Annexure-A have been made in Para 4.3,
5.4 We have gone through the various judicial pronouncements cited by the applicant in support of his claim. With great respect to the principles of law laid down in those decisions rendered in peculiar facts and circumstances of each case. we have no hesitation to say that the facts of t
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Description
1.
ENERGY METER READING OF RESIDENTIAL QUARTERS AT NALCO TOWNSHIP, DAMANJODI
Sushanta Engineers
1552
998599
Other support services n.e.c.
2.
ENERGY METER READING OF RESIDENTIAL QUATERS AT NALCO, DAMANJODI
ENGINEERS ENTERPRISE
1140
998599
Other support services n.e.c.
3.
DOOR TO DOOR GARBAGE COLLECTION & DISPOSAL AT DESIGNATED PLACE
Green Circle Environment Pvt. Ltd.
1500
999423
General waste collection services, residential
4.
FOGGING OPRN TO CONTROL MOSQUITOES AND ERADICATE LARVA IN PLANT & TOWNSHIP, NALCO, DMNJ
Pest Masters (India) Pvt. Ltd.
1225
999459
Other sanitation services n.e.c.
5.
ROAD SWEEPING WORK IN NALCO TOWNSHIP, SECTORS-I, II & III, & SAHEED LAXMAN NAYAK COLONY
D.N. Patra
1494
999451
Sweeping and snow removal services
6.
ROAD SWEEPING WORK IN PLANT ADMN. BUILDING, SURAKSHYA VIHAR, DR. AMBEDKAR COLONY
Anadi Lamta
1495
999451
Sweeping and snow removal services
7.
OPERATION AND MAINTENANCE OF SOLID WASTE TREATMENT PLANT AT
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nance or remodelling of the buildings covered above
13.
R & M OF TARFELTING, ROOF TREATMENT AND ALLIED WORKS IN QUARTERS AND PUBLIC BUILDINGS
B.D. Nayak
1344
995419
Services involving Repair, alterations, additions, replacements, renovation, maintenance or remodelling of the buildings covered above.
14.
REPAIR & MAINTENANCE OF TARFELTING, ROOF TREATMENT AND ALLIED WORKS IN ALUMINA PLANT
P.C. Sahu
1480
995419
Services involving Repair, alterations, additions, replacements, renovation, maintenance or remodelling of the buildings covered above
15.
DESILTING OF DRAINS & BERMS DRESSING INSIDE NALCO AR AND CISF ESTB. AT NALCO, DMNJ
Judhister Dalai
1312
995419
Services involving Repair, alterations, additions, replacements, renovation, maintenance or remodelling of the buildings covered above.
16.
DESILTING OF DRAINS AND BERMS DRESSING INSIDE NALCO AR AND CISF ESTB. AT NALCO, DMNJ
Anadi Lamta
1313
995419
Services involving Repair, alterations, additions, replacements,
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tion, maintenance or remodelling of the buildings covered above
21.
R & M AND OTHER ALLIED CIVIL WORKS IN RESIDENTIAL & PUBLIC BUILDINGS NALCO TOWNSHIP
M.H. ZAMAN
1522
995419
Services involving Repair, alterations, additions, replacements, renovation, maintenance or remodelling of the buildings covered above
22.
R & M AND OTHER ALLIED CIVIL WORKS IN RESIDENTIAL & PUBLIC BUILDINGS NALCO TOWNSHIP
AMULYA CONSTRUC-TION
1523
995419
Services involving Repair, alterations, additions, replacements, renovation, maintenance or remodelling of the buildings covered above
23.
PROVISION OF DRINKING WATER SUPPLY AT PICNIC SPOT
Sadashiv Enterprises
1550
995419
Services involving Repair, alterations, additions, replacements, renovation, maintenance or remodelling of the buildings covered above
24.
PERIODICAL PAINTING FOR THE BUILDING INSIDE AR AT NALCO, DAMANJODI
Jagannath Satpathy
1219
995473
Painting services
25.
PERIODICAL PAINTING FOR THE BUILDING INSIDE AR AT NALCO, DAMAN
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ARD OF NALCO, DMNJ.
CROWN SOLAR POWER FENCING SYSTEMS
1335
995469
Services involving Repair, alterations, additions, replacements, maintenance of the installations covered above
32.
MISCELLANEOUS ELECTRICAL MAINTENANCE AT NALCO TOWNSHIP FOR SECTOR-II & SURAKHYA VIHAR
RRR Perestroika
1457
995469
Services involving Repair, alterations, additions, replacements, maintenance of the installations covered above
33.
MISCELLANEOUS ELECTRICAL MAINTENANCE AT NALCO TOWNSHIP FOR SECTOR-II & SURAKHYA VIHAR
Sushanta Engineers
1458
995469
Services involving Repair alterations, additions, replacements, maintenance of the installations covered above
34.
MAINT OF 132 KV SWITCH-YARD, GRID TRANSFORMERS & POWER DISTRIBUTION SYS OF AR, NALCO, DMNJ
RRR Perestroika
1535
995469
Services involving Repair, alterations, additions, replacements, maintenance of the installations covered above
35.
REPAIRING, REPLACEMENT, REWINDING AND OVERHAULING OF CEILING FANS OF TOWNSHIP & PLANT
SADANANDA
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taker
1213
998599
Other support services n.e.c.
41.
MAINT & CARETAKING OF GET HOSTEL AND UPKEEPING OF EQUIP & APPLIANCES IN SHAILA NIWAS
GANESWAR HOSPITALITY & SERVICES
1226
998599
Other support services n.e.c.
42.
CONTRACTS FOR CLEANING OF LINENS OF SHAILA NIWAS AND ANNEXE AT NALCO, DAMANJODI
Snowhite Tours & Travels
1264
998533
General cleaning services
43.
URBAN PLANTATION AT KORAPUT, ODISHA
Dinabondhu Majhi
1408
998614
Support services to forestry and logging
44.
URBAN PLANTATION AT KORAPUT, ODISHA
Bijaya Kumar Kuldeep
1407
998614
Support services to forestry and logging
45.
MASS PLANTATION PROGRAMME FOR THE YEAR 2015-17, AT NALCO, DAMANJODI
Bijaya Kumar Kuldeep
1211
998614
Support services to forestry and logging
46.
MASS PLANTATION PROGRAMME FOR THE YEAR 2015-17 AT NALCO, DAMANJODI
Prafulla Kumar Patnaik
1212
998614
Support services to forestry and logging
47.
BUSH CUTTING & UPROOTING OF PARTHENIUM IN ALL SECTORS OF NALCO T/S INCLUDING SV
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