Kirby Building Systems & Structures India Private Limited ., In re

FULL TEXT OF THE ORDER OF APPELLATE  AUTHORITY FOR ADVANCE RULING,TELANGANA

1. In terms of Section 102 of the Telangana Goods and Services Tax Act, 2017 (TGST Act, 2017 or the Act), this Order may be amended by the Appellate authority so as to rectify any error apparent on the face of the record, if such error is noticed by the Appellate authority on its own accord, or is brought to its notice by the concerned officer, the jurisdictional officer or the appellant within a period of six months from the date of the order. Provided that, no rectification which has the effect of enhancing the tax liability or reducing the amount of admissible input tax credit shall be made, unless the appellant or the appellant has been given an opportunity of being heard.

2. Under Section 103 (1) of the Act, this advance ruling pronounced by the Appellate Authority under Chapter XVII of the Act shall be binding only.

(a) On the appellant who had sought it in respect of any matter referred to in sub-Section (2) of Section 97 for advance ruling;

(b) On the concerned officer or the jurisdictional officer in respect of the appellant.

3. Under Section 103 (2) of the Act, this advance ruling shall be binding unless the law, facts or circumstances supporting the original advance ruling have changed.

4. Under Section 104 (1) of the Act, where the Appellate Authority finds that advance ruling pronounced by it under sub-Section (1) of Section 101 has been obtained by the appellant by fraud or suppression of material facts or misrepresentation of facts, it may, by order, declare such ruling to be void ab-initio and thereupon all the provisions of this Act or the rules made thereunder shall apply to the appellant as if such advance ruling has never been made.

***

Sub: GST – Appeal filed by M/s Kirby Building Systems & Structures India Private Limited, under Section 100 (1) of TGST Act, 2017 against Advance Ruling TSAAR Order No.22/2023 dated 15.11.2023 passed by the Telangana State Authority for Advance Ruling – Order-in-Appeal passed – Regarding.

***

1. The subject appeal has been filed under Section 100 (1) of the Telangana Goods and Services Tax Act, 2017 (hereinafter referred to as “TGST Act, 2017” or “the Act”, in short) by M/s. Kirby Building Systems & Structures India Private Limited (GSTIN: 36AACCK5926G2ZH) (hereinafter referred in short as “the appellant”), against the Order No.22/2023 dated 15.11.2023 (“imnugned order”) nassed by the Telangana State An theritv for Advance Ruling (Goods and Services Tax) (“Advance Ruling Authority” / “AAR” / “lower Authority”).

2. At the outset, it is made clear that the provisions of both the CGST Act and the TGST Act are identical except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the corresponding provision under the TGST Act. Further, for the purposes of this Advance Ruling, the expression ‘GST Act’ would be a common reference to both CGST Act and TGST Act.

Brief facts of the case:

3. The appellant M/s. Kirby Building Systems & Structures India Private Limited, Sangareddy are into the manufacture and supply of pre-engineered buildings and storage racking systems. The appellant averred that they are providing canteen and transportation facilities to its employees at subsidized rates as per the terms of the employment agreement entered between the appellant and the employee. The appellant provided copies of employment agreement in Annexure-3 to the application. Para 8.2 of the agreement states that the “Company will provide transportation and canteen facility at subsidized rates as per the policy from time to time”. The appellant framed four questions for advance ruling.

4. Vide the impugned order, the Advance Ruling Authority has given the following advance ruling on the questions raised by the appellant:

Aggrieved by the advance ruling in respect of point no.(4) i.e., eligibility to avail ITC in respect of GST paid on inward supplies used for providing transportation facilities, the present appeal has been filed.

Whether the appeal is filed in time:

5. In terms of Section 100 (2) of the Act, an appeal against Advance Ruling passed by the Advance Ruling Authority, has to be filed within thirty (30) days from the date of communication thereof to the appellant. The impugned Order dated 15.11.2023 was communicated on 16.11.2023 as mentioned in their Appeal Form GST ARA-02. The subject appeal has been filed on 15.12.2023.

Grounds of Appeal: 

6.1 The appellant submits that the factory / manufacturing unit is located in a remote area of Pashamylaram village, Sangareddy district, Telangana. For the convenience of its employees to commute from their residence to the factory premises on to and for basis, the appellant is arranging for transportation facility at subsidized rate as per the employment agreement by hiring non-air-conditioned buses from third party vendors and discharging applicable GST under Reverse Charge Mechanism (RCM).

6.2 The appellant is arranging for transportation facility to the employees and recovering nominal amount from the employee’s salary towards the cost incurred for providing such transportation facility to the employees without any commercial objective.

6.3 The appellant submits that the non-air conditioned buses hired by the appellant from the vendors is an inward supply of service which is used by the appellant to provide transportation facility to its employees in the course of furtherance of business of manufacturing of prefabricated buildings.

6.4 The appellant also submitted that ITC cannot be restricted merely because there is no statutory obligation for providing transportation facilities.

Details of Personal Hearing:

7. Personal Hearing was held on 17.02.2025. Sri V Randeep, CA, appeared on behalf of the appellant. The CA reiterated the written submissions made in their appeal and requested to consider the same. Further, the authorised representative submitted copies of Gujarat Appellate Authority and Advance Rulings on similar issue and requested to consider the same.

Discussion and Findings:

8.1 This authority has carefully gone through the case records and submissions made by the appellant.

8.2 The only issue to be decided is that whether the appellant is eligible to claim ITC in respect of the GST paid on inward supplies used for providing transportation facilities to employees. The appellants have contended that the ITC on GST paid on inward supplies used for transportation facilities is not restricted since such activity of transportation to the employees is in the course or furtherance of business and not for the personal consumption of the employees.

8.3 As per Section 16(1) of CGST Act, 2017, every registered person shall, subject to such conditions and restrictions as may be prescribed and, in the manner, specified in Section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business. Section 17 of the CGST Act, 2017 provides for apportionment of credit and blocked credit. Section 17(5) of the Act restricts the input tax credit subject to the conditions prescribed therein. Section 17(5) has been amended by CGST (Amendment) Act, 2018 (No: 31 of 2018) dt: 29.08.2018 made effective from 01.02.2019, vide Notification No: 02/ 2019-CT dt: 29.01.2019.

The provisions of Section 17 (5) of the Act are reproduced hereunder:

“(5) Notwithstanding anything contained in sub-section (1) of section 16 and sub section (1) of section 18, input tax credit shall not be available in respect of the following, namely:-

(a) motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver), except when they are used for making the following taxable supplies, namely: –

(A) further supply of such motor vehicles; or

(B) transportation of passengers; or

(C) imparting training on driving such motor vehicles;

(aa) vessels and aircraft except when they are used-

(i) for making the following taxable supplies, namely:-

(A) further supply of such vessels or aircraft; or

(B) transportation of passengers; or

(C) imparting training on navigating such vessels; or

(D) imparting training on flying such aircraft;

(ii) for transportation of goods;

(ab) services of general insurance, servicing, repair and maintenance in so far as they relate to motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa):

Provided that the input tax credit in respect of such services shall be available-

(i) where the motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) are used for the purposes specified therein;

(ii) where received by a taxable person engaged-

(I) in the manufacture of such motor vehicles, vessels or aircraft; or

(II) in the supply of general insurance services in respect of such motor vehicles, vessels or aircraft insured by him;]

(b) the following supply of goods or services or both-

(i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) except when used for the purposes specified therein, life insurance and health insurance:

Provided that the input tax credit in respect of such goods or services or both shall be available where an inward supply of such goods or services or both is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply;

(ii) membership of a club, health and fitness centre; and

(iii) travel benefits extended to employees on vacation such as leave or home travel concession:

Provided that the input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force.” (emphasis supplied)

8.4 The proviso to the Section 17 (5) clearly stipulates that input tax credit shall be available only if it is obligatory on the part of the employer to provide the impugned services to its employees under any law. This is a substantial condition to be complied for getting the benefit of input tax credit. The appellants are under no statutory obligation to provide transportation facility to their employees. This facility has been provided to the employees as a measure of personal convenience since the factory is stated to be located in the remote area. In terms of Section 17(5)(g) of CGST ACT, 2017, input tax credit is not available in respect of goods or services or both used for personal consumption.

8.5 During the proceedings, the appellant contended that they are providing transport services under contractual agreement and ITC cannot be restricted merely because there is no statutory obligation for providing transportation facilities. We observe that the plain language of the statute is very clear and unambiguous. The credit is available only if goods and services, in respect whereof the credit is otherwise blocked are provided in terms of a statutory obligation. There is no authority in law to equate a “contractual obligation” as a “statutory obligation”. In this case, as the AAR has correctly held, the provision of canteen facility to staff by the employer is mandatory under Factories Act, 1948 and hence, input tax credit is available in such a case. The provision of transport facility not being mandated under any law, the credit cannot be allowed.

8.6 Further, CBIC vide Circular No: 172/ 04/ 2022-GST dt: 06.07.2022 has clarified that various perquisites provided by the employer to its employees in terms of contractual agreement entered into, are in lieu of the services provided by employee to the employer in relation to his/her employment and fall under the category of Schedule III to the CGST act and hence will not be subjected to GST. In the instant case, transportation services are provided as a perquisite by the employer in terms of contractual agreement and hence the amounts recovered from the employees held as not taxable by the Advance Ruling Authority. On this count alone, when transport services provided by the appellant to their employees are not taxable, the ITC on such inward services availed by them towards providing such non taxable services is not allowed.

8.7 Reliance has been placed on several advance rulings of other States, in support of the appellants’ contention. We have perused these rulings and find that these have been rendered in the specific facts of each case. Further, the statutory position being clear, we are in no doubt that the transportation facilities are being provided, in the instant case, as a measure of personal convenience to the employees. Therefore, these are in the nature of perquisites, which are not taxable. As such, ITC cannot be availed in respect of such non taxable services.

9. In view of the above, the following order is passed.

ORDER

The impugned order dated 15.11.2023 of the AAR is upheld and the appeal is rejected.