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#GSTCase-220-Schedule-I-Compilation of Cases and Circular on Supply of goods or services or both between related persons or between distinct persons as specified in section 25 and Supply of Goods between Principal and Agent

Case-1-Caltech Polymers (P.) Ltd [2018] 98 355 (AAAR-KERALA)

The crucial aspects to be considered in this case are the elements of “supply” and “consideration”. The appellant company has admitted that they are serving food to the employees for cash, though there is no profit involved in the transaction. In spite of the absence of any profit, the activity of supplying food and charging price for the same from the employees would surely come within the definition of “supply” as provided in Section 7(l)(a) of the GST Act, 2017. Consequently, the appellant would definitely come under the definition of “supplier” as provided in subsection (105) of Section 2 of the GST Act, 2017. Moreover, since the appellant recovers the cost of food items from their employees, there is “consideration” as defined in Section 2(31) of the GST Act, 2017.

Case-2-Jotun India (P.) Ltd., [2019] 110 184 (AAR – MAHARASHTRA)

Mediclaim insurance policy has been issued by “The Oriental Insurance Company Ltd”. The applicant initially pays entire premium along with taxes and then recovers 50% of the premium rough salary in one instalment in case of staff and in three instalments in case of operators as the case may be. The Applicant is not in the business of providing insurance coverage. Secondly, to provide parental insurance cover, is not a mandatory requirement under any law for the time being in force and therefore, non-providing parental insurance coverage would not affect its business by any means. Therefore, activity of recovery of 50% of the cost of insurance premium cannot be treated as an activity done in the course of business or for the furtherance of business. The activity undertaken by applicant like providing of mediclaim policy for the employees’ parent through insurance company neither satisfies conditions of section 7 to be held as “supply of service” nor it is covered under the term “business” of section 2(17) of CGST ACT 2017.  

Case-3- Tata Motors Ltd. [2020] 119 106 (AAR – MAHARASHTRA)

5.3 The second question raised by the applicant is whether GST is applicable on nominal amount recovered by Applicants from their employees for usage of employee bus transportation facility in non-air conditioned bus.

The Authority observed that

5.3.2 In the subject case we find that the applicant is not providing transportation facility to its employees, in fact the applicant is a receiver of such services in the instant case. The applicant’s contentions that they are eligible for exemption from GST under Sl. No. 15(b) of Notification No. 12/2017-Central Tax (Rate) dated 28-6-2017 in respect of nominal amounts of recoveries made from their employees towards bus transportation service, is not correct. The exemption under the said notification is available only when the supply is taxable in the first place. In the subject case, the transaction between the applicant & their employees, due to “Employer-Employee” relation as slated by the applicant in their submissions, is not a supply under GST Act.

5.3.3 To answer the second question we now refer to Schedule III to the CGST Act which lists activities which shall be treated neither as a supply of goods nor a supply of services. As per clause 1 of the said Schedule-Ill. Services by an employee to the employer in the course of or in relation to his employment shall he treated neither as a supply of goods nor a supply of services.

5.3.4 Since the applicant is not supplying any services to its employees, in view of Schedule III mentioned above, we arc of the opinion GST is not applicable on the nominal amounts recovered by Applicants from their employees in the subject case.

Case-4-Posco India Pune Processing Center (P.) Ltd [2019] 102 21 (AAR – MAHARASHTRA)

50% of the premium amount recovered from the employees cannot be treated as amount received for services rendered, since the entire amount is paid to the insurance company which is providing mediclaim facilities to the employees and their parents. Such recovery of 50% premium amount by the applicant from their employees cannot be supply of service under the GST laws. In fact, what is happening in this case is that since the applicant is recovering 50% of the premium paid on the Mediclaim from their employees, they want to treat the same as rendering of insurance output service to their employees and therefore they are contending that they are entitled to 100 % input tax credit on the insurance premium paid to the insurance company in terms of Section 17(5)(b)(iii) of the GST Act, 2017, mentioned above. They have already submitted that they are primarily engaged in distribution of steel coils and also perform low value added processing function in respect of some of the traded goods based on customer’s requirements. The Applicant has brought nothing on records to show that they are an insurance company and registered with such authorities.

Hence, we find that they are not rendering any service of health insurance to their employees and hence, there is no supply of services in the instant case”.

Case-5- CBIC Press Release 10 July 17 (Gifts & Perquisites)

“Gift has not been defined in the GST law. In common parlance, gift is made without consideration, is voluntary in nature and is made occasionally. It cannot be demanded as a matter of right by the employee and the employee cannot move a court of law for obtaining a gift.”

The Press Release further provided that

“It is pertinent to point out here that the services by an employee to the employer in the course of or in relation to his employment is outside the scope of GST (neither supply of goods or supply of services). It follows therefrom that supply 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. Further, the input tax credit (ITC) scheme under GST does not allow ITC of membership of a club, health and fitness centre [section 17 (5) (b) (ii)]. It follows, therefore, that if such services are provided free of charge to all the employees by the employer then the same will not be subjected to GST, provided appropriate GST was paid when procured by the employer. The same would hold true for free housing to the employees, when the same is provided in terms of the contract between the employer and employee and is part and parcel of the cost-to-company (C2C).”

Case-6- Columbia Asia Hospitals (P.) Ltd. [2018] 100 501 (AAAR-KARNATAKA)

In addition to these core functions, the head office also has a service provider role. In this role, the head office provides those services that business units require, such as ICT systems and training systems. In the case of the appellant’s organisation, the Head Office or the India Management Office is the nodal office which caters to various business processes of all their units located in Karnataka as well as in other States. The IMO handles activities like, accounting, payment of salaries, income tax deductions, provident fund deductions, legal support, strategic directions, technical support and shared knowledge base which benefit all their offices across the country. The IMO is a registered person in Karnataka and is a distinct person in terms of section 25(4) of the CGST Act. The execution of the above mentioned activities by the IMO which is for the benefit of all their other units is in the nature of a service by the IMO. As such there is a supply of service by the IMO to the other distinct units of the Company.

Case-7- Circular No. 80/54 /2018-GST Dated 31st December 2018

13. Applicability of GST on supply of cranes, rigs, tools & Spares and other machinery when moved from one state to another by a person on his account for there use for supply of service

13.1 As per Circular No. 21/21/2017-GST dated 22.11.2017, it was clarified that no IGST would be applicable on such interstate movements of rigs, tools & spares and all goods on wheels. Doubts have been raised regarding applicability of GST on inter-state movement of machinery like tower cranes, rigs, batching plants, concrete pumps and mixers which are not mounted on wheels, but require regular means of conveyance (used by companies in Infrastructure business).

13.2 Any inter-state movement of goods for provision of service on own account by a service provider, where no transfer of title in such goods or transfer of goods to the distinct person by way of stock transfer is not involved, does not constitute a supply of such goods. Hence, it is clarified that any such movement on own account (not involving distinct person in terms of section 25), where such movement is not intended for further supply of such goods does not constitute a supply and would not be liable to GST.

Also Refer- Supply, scope of – Clarification on Inter-State movement of various modes of conveyance, carrying goods of passengers or for repairs and maintenance- CIRCULAR NO.1/1/2017-IGST, DATED 7-7-2017

Clarification on Inter-State movement of Rigs, Tools and Spares and all goods on wheels (like Cranes)- Circular 1/1/2017- Circular No.21/21/2017-GST [F.NO.354/320/2017-TRU (PT.)], DATED 22-11-2017

Case-8- Tata Coffee Ltd. [2019] 110 342 (AAR – KARNATAKA)

The timber/wood belonging to the applicant is handed over to the Karnataka Timber Depot (referred hereinafter as “Depot”) for auction or further supply and the Depot is raising invoice against such supply made to third parties. This action of the Depot is in the capacity of an agent of the applicant with rights to transfer the title of the goods to third parties and hence is clearly transferred the same as an agent of the applicant. Hence the supply made by the agent on behalf of the principal amounts to supply and the depot is collecting GST on the same. The Depot is remitting the sale value of the timber to the applicant. Since depot is considered as an agent within the meaning of clause (5) of section 2 of the Central Goods and Services Tax Act, 2017, the transfer of goods from the applicant to the agent is also a supply vide Clause 3 of Schedule I to the CGST Act, 2017. From the above it is clear that the supply of goods by the applicant to the depot for further supply on behalf of the principal would also amount to a supply and  the applicant has to issue a tax invoice and discharge GST on the same.

Case-9- CIRCULAR NO.57/31/2018-GST [CBEC-20/16/4/2018-GST], DATED 4-9-2018 [AS CORRECTED BY CIRCULAR NO. CBEC/20/16/04/2018-GST, DATED 5-11-2018]

Firstly, the supply of services between the principal and the agent and vice versa is outside the ambit of the said entry, and would therefore require “consideration” to consider it as supply and thus, be liable to GST. Secondly, the element identified in the definition of “agent”, i.e., “supply or receipt of goods on behalf of the principal” has been retained in this entry. Thus, the key ingredient for determining relationship under GST would be whether the invoice for the further supply of goods on behalf of the principal is being issued by the agent or not. Where the invoice for further supply is being issued by the agent in his name then, any provision of goods from the principal to the agent would fall within the fold of the said entry. However, it may be noted that in cases where the invoice is issued by the agent to the customer in the name of the principal, such agent shall not fall within the ambit of Schedule I of the CGST Act. Similarly, where the goods being procured by the agent on behalf of the principal are invoiced in the name of the agent then further provision of the said goods by the agent to the principal would be covered by the said entry. In other words, the crucial point is whether or not the agent has the authority to pass or receive the title of the goods on behalf of the principal.

Scenario-1- Mr. A appoints Mr. B to procure certain goods from the market. Mr. B identifies various suppliers who can provide the goods as desired by Mr. A, and asks the supplier (Mr. C) to send the goods and issue the invoice directly to Mr. A. In this scenario, Mr. B is only acting as the procurement agent, and has in no way involved himself in the supply or receipt of the goods. Hence, in accordance with the provisions of this Act, Mr. B is not an agent of Mr. A for supply of goods in terms of Schedule I.

Scenario-2-M/s XYZ, a banking company, appoints Mr. B (auctioneer) to auction certain goods. The auctioneer arranges for the auction and identifies the potential bidders. The highest bid is accepted and the goods are sold to the highest bidder by M/s XYZ. The invoice for the supply of the goods is issued by M/s XYZ to the successful bidder. In this scenario, the auctioneer is merely providing the auctioneering services with no role played in the supply of the goods. Even in this scenario, Mr. B is not an agent of M/s XYZ for the supply of goods in terms of Schedule I.

Scenario-3-Mr. A, an artist, appoints M/s B (auctioneer) to auction his painting. M/s B arranges for the auction and identifies the potential bidders. The highest bid is accepted and the painting is sold to the highest bidder. The invoice for the supply of the painting is issued by M/s B on the behalf of Mr. A but in his own name and the painting is delivered to the successful bidder. In this scenario, M/s B is not merely providing auctioneering services, but is also supplying the painting on behalf of Mr. A to the bidder, and has the authority to transfer the title of the painting on behalf of Mr. A. This scenario is covered under Schedule I.

Scenario-4-Mr A sells agricultural produce by utilizing the services of Mr B who is a commission agent as per the Agricultural Produce Marketing Committee Act (APMC Act) of the State. Mr B identifies the buyers and sells the agricultural produce on behalf of Mr. A for which he charges a commission from Mr. A. As per the APMC Act, the commission agent is a person who buys or sells the agricultural produce on behalf of his principal, or facilitates buying and selling of agricultural produce on behalf of his principal and receives, by way of remuneration, a commission or percentage upon the amount involved in such transaction. In cases where the invoice is issued by Mr. B to the buyer, the former is an agent covered under Schedule I. However, in cases where the invoice is issued directly by Mr. A to the buyer, the commission agent (Mr. B) doesn’t fall under the category of agent covered under Schedule I.