A new ruling by the Appellate Authority of Advance Ruling (AAAR) can open a Pandora’s Box when it comes to an employer, employee relationship and the nature of perquisites being provided. The case came up when the National Aluminum Company Limited (NACL), a manufacturer of aluminum metal, decided to appeal against the ruling pronounced by the Odisha Authority for Advance Ruling. NACL has townships at Angul, Damonjodi and Bhubaneswar for its employees and also runs hospitals at Damanjodi and Angul for its employees along with guest houses for touring employees and guests.
The bone of contention was that NACL wanted to claim input credit in maintaining hospitals, residential colonies and guest house and also the upkeep of garden in the residential colonies, mine and office premises. When the case went to the Odisha Authority for Advance Ruling (AAR), input credit was disallowed for some activities. According to the AAR, inward supplies received by way of management, repair, renovation for furnishing the residential colony does not qualify for input tax credit as residential accommodation is an exempted supply.
Input tax credit is also not admissible in respect of services and goods procured for maintenance of hospitals and pharmacy outlet as such services, being nil rated also fall under exempt supplies. Similarly, the service availed in relation to plant & garden in the residential colony will also not qualify for input tax credit NACL was, however, entitled to input tax credit of the tax paid on inward supply of input and input service for maintenance of the guest house, transit house & training hostel. Also, services availed in relation to plantation and gardening within the plant area including mining area and the premises of other business establishments will also qualify for input tax credit.