The Authority for Advance Ruling ( AAR ), Odisha has granted a ruling on entitlement to take credit of tax paid on various goods and services used for maintenance of township, guest house, hospital, horticulture maintained by a Company, in its ordinary course of business.
The applicants provide townships and colonies near its factories and offices for its employees. It also operates guest houses for a temporary stay of employees and guests. It runs hospitals for its employees.
They receive various services of repair and maintenance in the townships, guest houses, hospitals and horticulture which are received as part of its business operations. Such suppliers are also charging GST in their invoices.
The applicants submitted that the management, maintenance, and repair service obtained from the service providers for the running of these establishments has the direct benefit to the business operations of the applicant. Since the services are used in the course of and, also, in furtherance of its business, it is entitled to utilize credit of input tax paid by the service providers for paying output tax on the supplies made by the applicant in terms of section 16 of CGST Act.
That the supplies, on which the applicant seeks to take input tax credit, are not blocked in section 17(5) of CGST Act. It was also stated that it would be entitled to take credit of tax paid on works contract service only for activities, for which the expenditure is claimed as revenue expenditure and not capitalized. It would not claim any credit with respect to services for which the expenditure is capitalized.
After hearing contentions from both sides, the authority noted that the 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. Consequently, the inputs and input services received by the applicant for dispensing the exempt service will not qualify for input tax credit in terms of Section 17 (2) of the OGST/CGST Act.