Fact: M/s National Aluminium Company Ltd, is a Government of India enterprise and engaged in manufacture of calcined alumina, in its refinery located at Damanjodi in the State of Odisha. Produced alumina is transported to aluminium smelter at Angul (Odisha) for production of aluminium cold rolled sheets and coils as part of its business; It is having townships at Damanjodi, Angul and residential colony at Bhubaneswar. It runs hospitals at Damanjodi and Angul for its employees. It also has guest houses for touring employees and guests. The suppliers of such services are charging GST in their invoices. That services of management, maintenance and repair in its townships, guest houses, hospitals and horticulture are being used in the course or furtherance of the applicant’s business and, while filing the application seeking advance ruling and tried to justify their claim for entitlement of input tax credit of tax paid on various supplies received for management maintenance and repair of their various properties for their business.
Issue Involved: Whether the applicant is entitled to take input credit of tax paid on various goods and services used for maintenance of applicant’s townships, guest houses, hospitals and horticulture for paying output tax.
Held: The Hon’ble AAR of Odisha vide Advance Ruling ORDER NO.02/ODISHA-AAR/18-19 dated September 28, 2018 stated as follows:
- The input, and /or input services received by the applicant for the activities such as maintenance and repair of the townships, guest houses, hospitals and horticulture have no nexus to the manufacturing activity undertaken by the applicant. The said activities are neither relating to business nor relating to manufacture of final product and its supply. The said activities may be welfare activities undertaken while carrying on the business but to qualify as input service, the activity must have nexus with the business of the applicant. The expression “in course or furtherance of business” appearing in Section 16(1) of the GST Act refers to activities which are integrally related to the business activity and not welfare activities. Inter-alia following rulings are made in respect of certain input services:
- Residential accommodation: service by way of residential accommodation in the colonies or otherwise is a perquisite which has been clarified as not chargeable to GST implying thereby any perquisite including residential accommodation is an exempt supply. In the result, the inward supplies received by way of management, repair, renovation, alteration or maintenance service or goods received for furnishing the residential colony shall not qualify for input tax credit in terms of Section 17 (2) of the OGST/CGST Act. The services which are being availed clearly in relation to the residential colony shall not qualify for input tax credit. Other ancillary input services like maintaining and furnishing guest houses including landscaping by way of gardening or otherwise is neither a perquisite nor a statutory obligation. It is purely for providing accommodation service to guests including employees on tour. This is in fact a business requirement to maintain such facilities and accordingly the applicant is entitled to input tax credit of the tax paid on inward supply of input and input services for maintenance of the guest house, transit house, and training hostels, but excluding the food and beverages provided in such establishments. Credit of such input services are as such blocked-in clause b of Sub section 5 of section 17 of the OGST and CGST Act. It is further clarified that, the applicant might not be charging anything from the guest or the trainees for providing food and beverages in the guest houses and training hostels and in such case the inputs used for preparing the food and beverages or input catering services shall not qualify for input tax credit.
- Hospital: Establishment of hospitals and maintenance thereof may be for discharging the statutory obligation under the ESI Act by the employer but dispensing medical service to the employees and others is a supply of service by the employer. Such service being nil rated will fall under exempt supplies. In the absence of such provisions, input tax credit shall not be available to the applicant in respect of the services and goods procured for maintenance of hospital and pharmacy outlet as per the current provisions in the OGST/CGST Act.
- Horticulture: services for maintenance of plant and gardens within the residential colony and other public utility created by the applicant will form part of the residential colony and in turn part of the perquisite provided to the employees. Services availed in relation to the plants and garden in the residential colony will not qualify for input tax credit.
The applicant may however, claim input tax credit in respect of the input services to the extent allowed in this ruling.
Citation: [TS-557-AAR-2018-NT]