GST Advance Rulings – August 2022

Ruling: GST not leviable on employees’ portion of canteen charges.

In the given case the applicant provides canteen facilities to its employees and workers as mandated by Section 46 of the Factories Act,1948 through a third-party vendor who prepares the food and supplies it to the company’s employees and the contractual woker. The vendor raises an invoice on the company by charging GST @5%, whereas the applicant provides the canteen facilities at a subsidized rate of 50% to its employees and contractual workers.

The Authority for Advance Ruling held that :-

GST is not leviable on the amount representing the employees portion of canteen charges collected by the applicant and paid to the vendor as per the clarification issued by CBIC vide Circular No. 172/04/2022-GST dated 06-07-2022 which is as follows-

• Schedule III to the CGST Act provides that “services by employee to the employer in the course of or in relation to his employment” will not be considered as supply of goods or services and hence GST is not applicable on services rendered by employee to employer provided they are in the course of or in relation to employment.
• Any perquisites provided by the employer to its employees in terms of contractual agreement entered into between the employer and the employee are in lieu of the services provided by employee to the employer in relation to his employment. It follows therefrom that perquisites provided 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 when the same are provided in terms of the contract between the employer and employee.

Whereas the contractual workers do not pass the test of employer-employee relationship as enumerated in Entry I of Schedule III of CGST Act and hence the amount recovered from them on account of third-party canteen services would be liable to tax as a “supply” under GST.

As per the proviso to Section 17(5)(b) which stipulates that ITC shall be available on the GST paid where it is obligatory for an employer to provide a benefit to its employees in terms of any law for the time being in force and with respect to the clarification issued by CBIC vide Circular No. 172/04/2022 -GST dated 06-07-22, it can be inferred that: –

ITC on GST paid on canteen facility is admissible to the applicant on the food supplied to its employees subject to the condition that burden of GST has not been passed on to the employees of the company.

Also, it was held that the applicant company is not eligible to the ITC on food supplied to the contractual worker under Section 17(5)(b) of CGST Act, 2017 as they do not fall within the ambit of employer-employee relationship and also it is not obligatory on the applicant company to provide canteen facility to the contractual workers as per the provisions of Contract Labour (Regulation and Abolition) Act,1970.

Ruling: Advance ruling application not maintainable on issue pending before Authorities.

In the given case, the applicant has filed an online application on 23.05.2022 seeking advance ruling on the applicability of GST on supply of manpower services to M/s. Karnataka Institute of Leather Technology. The notice U/s 73 of KGST/CGST Act,2017 dated 18.05.2022 issued by the concerned authorities also pertains to the the applicability of GST on the above-mentioned services.

The Hon’ble AAR rejected the application as inadmissible in terms of first proviso to Section 98(2) of the CGST Act, 2017 which reads as follows-

“The Authority shall not admit the application where the question raised in the application is already pending or decided in any proceedings in the case of applicant under any provisions of this Act”.

Thus, it was held that advance ruling application is not maintainable where notice u/s 73 is already issued by concerned authorities on the same subject matter.

Ruling: No GST on services of sweeping, segregation and transport of garbage.

In order to claim exemption on supply of services as per Entry No. 3 of Notification No. 12/2017 (Central Tax Rate) dated 28.06.2017, the following two conditions should be satisfied: –

• Pure Services (excluding works contract service or other composite supplies involving any goods) provided to the Central Government, State Government or Union territory or local authority or a Governmental authority.
• By way of any activity in relation to any function entrusted to a Panchayat under article 243Gof the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution.

The Karnataka Authority for Advance Ruling held that provision of services of cleaning and sweeping of lawns and garden path areas, segregation and transport of garbage and supply of manpower for garden maintenance on outsource basis to Horticulture Department, Government of Karnataka is in relation to function entrusted to a municipality under article 243W of the constitution which is covered by 12^th entry of Twelfth schedule of the Constitution dealing with “ Provision of urban amenities and facilities such as parks, gardens, playgrounds”.

Since the two conditions required for claiming exemption under Entry No. 3 of Notification No. 12/2017 are satisfied, hence the above-mentioned services are liable for GST at Nil rate.

Ruling: Printing of question papers constitutes supply of service and printing answer booklets constitutes supply of goods.

The Hon’ble AAR gave the following ruling in the given case where the applicant states that it would be engaged in the proposed activity of printing stationery items on contract basis for the Karnataka Secondary Education Examinations Board (KSEEB) which would be utilized for the conduct of examinations-

• KSEEB is an educational institution for the limited purpose of providing services by way of the conduct of examinations to students.
• Activity of printing stationery items such as question papers, admit cards, SSLC Pass Certificates, the overprinting of variable data and lamination, fail marks cards, circulars and ID cards on contract basis for KSEEB, would constitute a supply of service to an “educational institution”.
• Activity of printing stationery items such as answer booklets, other formats used for and during examinations, and envelopes for packing answer booklets on contract basis for KSEEB, would constitute a supply of goods to an “educational institution”.
• The services provided to KSEEB by way of printing of stationery for conducting examinations is exempted as per entry No.66 (Heading 9992) of Notification No. 12/2017 Central Tax (Rate) dated 28^th June,2017 as amended vide Notification No.02/2018 Central Tax (Rate) dated 25^th January, 2018.

Thus, the AAR held that printing of question papers constitutes supply of service and printing answer booklets constitutes supply of goods.

Ruling: Society supplying free textbooks to students is not State Government.

The Karnataka Advance Ruling Authority in response to the applicant’s question who is bidding for the tender floated by the Karnataka Textbook Society (KTBS) for the printing of school textbooks as prescribed by the Karnataka State Board has given the following ruling: –

• Whether KTBS should be classified as “educational institution” or as “State Government” for the purpose of applicability of GST on printing services provided to it by the applicant?

As per clause 2(y) of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 which defines “educational institution, it can be concluded that since KTBS is not an institution providing services by way of pre-school or higher secondary education or approved vocational education course but is a society only supplying textbooks to students, hence it cannot be classified as “educational institution”.

As already mentioned above KTBS is a Society registered under the Karnataka Societies Act,1960 receiving grants from the Government of Karnataka, the same cannot be considered as “State Government”.

Thu KTBS is neither classified as “educational institution” nor as a “State Government”.

• Whether the rate of tax being charged @12% on the printing of textbooks supplied to KTBS is correct or whether any exemptions/ lower rate of tax would be applicable?

As per the applicant, he provides the materials (physical inputs) and the content is owned by the KTBS which implies that it is only printing the content provided to it by the recipient of supply and the same is the principal supply falling under heading 9989 taxable @18%.

Thus, the tax being charged at present @12% on the printing services provided to KTBS is incorrect and the same is taxable @18% as per entry No. 27 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 further amended vide Notification No. 6/2021-Central Tax (Rate) dated 30.09.2021.

Ruling: GST Exemption on service of educating and training farmers related to agroforestry.

In the given case the applicant has entered into a service contract with M/s. Isha Outreach, a public charitable trust, to provide services for promoting tree based agriculture by educating and training farmers of Cauvery river Basin.

Whether the said services are exempted in terms of entry No.57 of the Notification No.9/2017-Integrated Tax (Rate) dated 28.06.2017, as Agriculture Extension Services?

The AAR observed that the term “agricultural extension” is defined as the application of scientific research and knowledge to agricultural practices through framer education or training .

Since the services of the applicant are covered under agricultural extension services, they are exempted by way of above-mentioned notification.

Thus, the Hon’ble AAR held that service of educating and training farmers related to agroforestry is exempted under GST.

Ruling: Supply of services for plantation of mangrove seeds and seedlings in coastal areas attracts 18 % GST.

The applicant is in the business of cultivation, planting and nurturing of fruit trees in marginalised areas and mangrove seeds and seedlings in coastal areas across different states of the country with the sole aim of environmental protection against climate change.

The Hon’ble AAR on the issues raised by the applicant held that: –

• Supply of services for cultivation, planting and nurturing of fruit trees shall be covered under serial no. 24 of Notification No. 11/2017 -Central Tax (Rate) dated 28.06.2017 having SAC 9986 and therefore shall attract Nil rate of tax.
• Supply of services for plantation of mangrove seeds and seedlings in coastal areas shall be covered under serial no.32 of Notification No.11/2017-Central Tax (Rate) dated 28.06.2017 having SAC 9994 and therefore shall attract GST@ 18%.

Ruling: GST Exemption on composite supply of service by milling food grains into flour to State Government for Public Distribution System.

In the given case the applicant sought an advance ruling on the issue of whether the composite supply of services by way of milling of food grains into flour to the West Bengal Government for distribution of flour under Public Distribution System (PDS) is eligible for GST exemption.

Eligibility for exemption under serial no. 3A of Notification no.12/2017-Central Tax (Rate) dated June 28,2017-

• The supply being made can be regarded as a composite supply of goods and services.
• The supply qualifies as a function entrusted to a panchayat under Article 243G of the Constitution or a function of a municipality under Article 243W of the Constitution.
• The value of the supply of goods constitutes not more than 25 % of the value of the said composite supply.

The Hon’ble AAR held that public distribution is specifically mentioned in entry 28 of the Constitution’s 11^th Schedule which lists the activities that can be delegated to a Panchayat under Article 243G of the Constitution and hence the composite supply made by the applicant is found to be in relation to any function entrusted to a Panchayat under Article 243G of the Constitution making it eligible for exemption under GST as per the above-mentioned notification.

Ruling: “Flavoured milk” is categorised as “Beverage”.

The present appeal has been file under Sec 100 of the CGST Act,2017 and the GGST Act,2017 by the appellant against the Advance Ruling No.GUJ/GAAR/R/05/2021 dated 20.01.2021.

As per the appellant, it is the manufacturer of flavoured milk under the trade name of “Power Sip” classifiable under Heading 04029990 but the GAAR has given the ruling as follows-

“Flavoured milk” is classifiable under Tariff item 22029930 of the First Schedule of the Customs Tariff Act,1975 as a “beverage containing milk”.

Aggrieved by this ruling, the appellant in the ground of appeal has submitted that the GAAR erred in overlooking the fact that the product in question was milk itself and not a beverage containing milk or a beverage based on milk.

The Gujarat Appellate Authority for Advance ruling rejected the appeal filed by the appellant and upheld the ruling given by GAAR on the following grounds as explained below.

• National Dairy Development Board (NDDB) is a nodal agency in the Dairy products and “Flavoured Milk” is categorized as a “Dairy based Beverage” on its website.
• Further as per Oxford dictionary definition, Beverage is “any type of drink except water”.
• The Appellate Authority for Advance Ruling, Tamil Nadu in the case of M/s. Britannia Industries Ltd. having the similar facts of the case, vide its Order in Appeal No. AAAR/16/2021(AR) dated 30.06.2021 held that flavoured milk is not classifiable under Tariff Heading 0402/0404 but classifiable under CTH 2202 99 30.

Thus, it is concluded that the product in hand is a Beverage containing milk classifiable under tariff item 2202 99 30.

Ruling: Agricultural manually hand operated seed dressing, coating and treating drum is covered under HSN Code 8436.

The Gujarat Appellate Authority for Advance Ruling in a recent judgement upheld the ruling of GAAR pronounced vide Advance Ruling No. GUJ/GAAR/R/25/2021 dated 09.07.2021 and rejected the appeal filed by the appellant M/s. Adarsh Plant Protect Ltd. on the following grounds:

The appellant’s product viz. manually hand operated seed dressing, coating and treating drum is covered within the description provided under the HSN Code 8436 and its use as well as function is described under the said HSN Code.

Therefore, it is held that the GAAR has correctly classified the product in question under Chapter Heading 8436 and tariff item 8436 80 90.