AAR & AAAR Weekly Round-Up

(DEC. 11 - 24, 2022) This weekly round-up analytically summarizes the key stories related to the Goods and Service Tax Authority for Advance Ruling (AAR) and Appellate Authority for Advance Ruling (AAAR), reported at Taxscan.in during the previous two weeks of 11th to 24th of December, 2022. GST Applicable on Deduction made on Employees’ Salary for Canteen Facility GST would be applicable on the deduction made on the employees’ salary for the canteen facility held by the Karnataka Advance Ruling Authority (AAR) In Re: M/s Federal Mogul Goetze India Ltd.: 2022 TAXSCAN (AAR) 286. The applicant M/s Federal Mogul Goetze India Ltd had sought advance ruling on whether the GST would be applicable on the deduction made on the salary of the employee, that is whether it would amount to supply under Section 7 of the Central Goods and Service Tax Act, 2017. Neethu James, on behalf of the applicant submitted that the canteen was formed only because of the mandatory provision without any legal intention to form contractual relationship and therefore would not create supply. The decision was contrary to the contention and held that subsidised deductions made by the applicant on the canteen facility would be considered as supply under Section 7 of CGST Act 2017 and GST would be applicable. No GST on Reimbursement of Expenses incurred by Employees on behalf of Company The Karnataka Authority of Advance Ruling (ARR), In Re: M/s Yaadvi Scientific Solutions Private Ltd.: 2022 TAXSCAN (AAR) 287, ruled that the reimbursement of expenses at actual cost which are incurred by the employees on behalf of the company is non taxable under Goods and Services Tax Act, 2017 since it comes under the ambit of Schedule III of Central Goods and Services Tax Act. The issue is whether reimbursement of expenses in actual cost which are incurred by the employees on behalf of the company is liable to tax. The bench observed that the services by an employee to the employer in the course or in relation to his employment are covered under Clause 1 of the Schedule III which relates to the activities or transactions which shall be treated neither as a Supply of Goods nor as a Supply of Services. Further, the amount reimbursed by the applicant to the employee later on would not amount to consideration for the supplies received is not liable to tax. RCM not applicable on Reimbursement of Expenses incurred by the Whole-Time Director The Karnataka Authority of Advance Ruling (AAR) ruled that the reimbursement of expenses incurred by the employee on behalf of the company is on-taxable In Re: M/s Yaadvi Scientific Solutions Private Ltd.: 2022 TAXSCAN (AAR) 287. The issue in this case is whether the taxability of the reimbursement given to the whole time director expenses incurred on behalf of the company or whether the whole time director is an employee or not. The authority tried to interpret “Salary” and “other than salary” and the whole time director’s consideration comes under “Salary”, thus he is an employee of the company. The bench determined that Reverse Charge Mechanism (RCM) is not applicable to the expenses paid by the whole-time director on behalf of the company who is also an employee of the company and falls under the purview of Schedule III of the Goods and Services Tax Act with the aid of the circulars and an understanding of the expression “expenses paid” on different heads. Transfer of Monetary Proceeds without underlying Import of Services are liable to IGST under RCM The Maharashtra Authority for Advance Ruling (AAR) has recently ruled that the transfer of monetary proceeds without underlying import of services by M/s. IVL India Environmental R&D Private Limited is liable to be taxed under Integrated Goods and Services Tax (IGST) as per the Reverse Charge Mechanism (RCM). The assessee seeked ruling on the liability to pay tax on mere transfer of monetary proceeds by the applicant, IVL India Environmental R&D Private Limited to IVL Swedish Environmental Research Institute Limited. The Authority Bench In Re: M/s. IVL India Environmental R&D Private Ltd.: 2022 TAXSCAN (AAR) 288 observed that, the “services are received by the applicant from IVL to further perform its services under the contract, for which monetary proceeds flow from the applicant to IVL Sweden.” Glaze Gels attract 18% GST The glaze gels are subject to 18% GST, according to the Maharashtra Authority of Advance Ruling (AAR). The applicant, M/s Healthy Life Foodtech Pvt. Ltd., is registered under the MGST Act of 2017, and it manufactures and distributes Glaze Gels to Bakeries all over India. The subject product must be classified as "Sugar Boiled Confectionery" falling under Chapter Heading 1704 and covered by Schedule II, attracting 12% GST as amended from time to time regarding the rate of GST on goods. This is because the process of manufacturing "glaze gels" is similar to the process of manufacturing "SBC." The contested item is a sugar-based candy, it comes under Chapter Heading 1704, which is defined as “Sugar Confectionery (including white chocolate), without containing cocoa.” “Sugar confectionery (excluding white chocolate and bubble/chewing gum) ” falling under Chapter Heading 1704 attracted GST at 18%, according to Sr. No. 12 of Schedule III Central Tax (Rate) ruled by the bench In Re: M/s. Healthy Life Foodtech Private Ltd. : 2022 TAXSCAN (AAR) 289. ITC not available on Goods and Services used for Construction of Pipeline outside the Factory site u/s 17 of GST Act According to Section 17 of the Goods and Services (GST) Act, the Maharashtra Authority of Advance Ruling (AAR) ruled In Re: M/s. Mumbai Aviation Fuel Farm Facility Private Ltd.: 2022 TAXSCAN (AAR) 290 that Input Tax Credits (ITC) are not available on goods and services used for the installation of a pipeline laid outside the factory premises. The bench has also emphasized that 90% of the pipeline is outside the permitted area, therefore it cannot be claimed that this is the only outside pipeline that is regarded as a part of the plant and machinery. Supply of Garbage Tipper Vehicles of Tata Motors to Municipalities attract 28% GST The Maharashtra Authority of Advance Ruling (AAR) held that the supply of Tata garbage tipper vehicles to Municipalities shall attract 28% GST In Re: M/s. Tata Motors Ltd.: 2022 TAXSCAN (AAR) 291. The application was filed by the M/s Tata Motors Limited, engaged in the business of manufacturing and selling of vehicles, chassis of vehicles and other parts thereof, seeking advance ruling in respect of the rate of Integrated Goods and Service Tax on the Garbage Tipper Vehicles supplying to municipalities. Raula Gundi is a Chewing Tobacco without Lime Tube, attracts 28% GST The Orissa Authority for Advance Ruling (AAR) has held that “Raula Gundi” is chewing tobacco without lime tubes and attracts 28% GST. The applicant, M/s Das & Sons, manufactured "Raula Gundi" (Chewable Gundi, its ultimate product), and supplied it to various betel shops, grocery stores, tea shops, etc under the cover of Goods and Service Tax invoices. The bench In Re: M/s. Das & Sons CITATION: 2022 TAXSCAN (AAR) 292 stated that during the manufacturing process, the raw ingredients utilised by the applicant go through a number of steps and end up as "Chewable Tobacco Gundi," which can be marketed or consumed. The authority held that 28 % GST is applicable on the product and the product also appears at Sl. No.26 of the notification dated June 28, 2017, issued under the CGST Act, 2017, under which a compensation cess of 160% is leviable on it. Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates.

AAR & AAAR Weekly Round-Up

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