The Telangana Authority of Advance Ruling (AAR) has ruled that 18% of the commission will be deducted from the bonus amount as an intermediary.
M/s. Foodsutra Art of Spices Private Limited, the applicant is providing canteen services to ITC Limited. It was submitted that they have been issuing the invoices for their regular Canteen services @ 5%. Apart from that, they are also receiving a Lump Sum amount of bonus for paying their employees from their service recipient, for which they are charging @18%. But, their service recipient is not ready to accept the Invoice for charging @18%, instead of that they’re asking them to charge @5%.
According to Section 2 (32) of the Central Goods and Service Tax Act, 2017 – “consideration” about the supply of goods or services or both includes – (a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government.
The applicant submitted that they are taking consideration for paying their employees, by acting as an intermediary, so they are ready to issue an Invoice by applying an 18% GST Rate. The applicant is receiving regular amounts for the bills raised by them on the canteen services and annually they are receiving further amounts with the nomenclature of bonus.
As per Section 15 of the Central Goods and Service Tax/TGST Act, 2017 clause (b) of sub-section (2) states that the value of supply shall include “Any amount that the supplier is liable to pay about such supply but which has been incurred by the recipient of the supply and not included in the price paid or payable for the goods or services or both;”
The definition of consideration in sub-section 31 of Section 2 of the Central Goods and Service Tax Act, 2017 includes any payment made or to be made in response to the supply of goods or services. If the applicant does not retain a portion of the Lump Sum amount received for payment of bonus in the form of commission then the entire bonus amount shall be included in the taxable value of the canteen services as the bonus is also paid by the service recipient about the canteen services provided by the applicant to the recipient.
The bench of Kasi Visweswara Rao and Sahil Inamdar has observed that 5% GST is payable on the rest of the amount, which is arrived at after excluding the commission from the entire bonus, as it would be included as the value of supply of canteen services by Section 15(2) of the Central Goods and Service Tax Act, 2017.
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