[AAR-Gujarat, M/s. Kandla Port Trust ruling no:GUJ/GAAR/R/13/2019, dated 22 August 2019]
ITC not available in respect of specific expenses incurred for well-being of employees
· Facts of the case
M/s. Kandla Port Trust (‘taxpayer’) is engaged in providing port services to various clients. The taxpayer has provided housing facilities to its employees along with provision of common facilities like schools, sports complex, hospital, etc.;
In order to cater to the needs of employees who get their treatment done at the hospital, the taxpayer also procures various medical equipment for hospital and medicines for employees;
The taxpayer also procures various other goods/services in order to ensure the well-being of the employees residing at the housing facility.
· Questions before the AAR
1. Whether ITC would be eligible in respect of following expenses incurred by the taxpayer:
2. Purchase of medicines for employees as prescribed by their doctor from outside on contractual basis;
3. Purchase of movable medical equipment at hospital;
4. AMC for repair and maintenance of residential colony and hospitals and school (other than new constructions);
5. Telephones & Mobiles at residence of officers and at hospitals;
6. Caretaking / housekeeping services at Guest House.
· Contention of the taxpayer
The taxpayer contended that all the expenses mentioned above are incurred to ensure the safety and well-being of the employees. Further, the business cannot function without the support of the employees;
The taxpayer further submitted that the activities carried-out are squarely covered under the laws governing the functioning of the ports.
· Observation and ruling by the AAR
In view of combined reading of section 16 and section 17 of the CGST Act, 2017, it is clear that ITC is available only for expenses which are incurred in the course or furtherance of business;
The expenses incurred by the taxpayer do not relate to being in course or furtherance of business. Accordingly, ITC should not be eligible for the said expenditure;
The AAR held that the ITC for the said expenditure incurred by the taxpayer is not available under the GST laws.
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