No GST On Subsidised Deduction made From Employees Availing Food In Factory Or Corporate Office: Gujarat AAR

The Gujarat Authority of Advance Ruling (AAR) has ruled that GST is not payable on the subsidised deduction made by the applicant from the employees who are availing food in the factory/corporate office.

The two-member bench of Amit Kumar Mishra and Milind Kavatkar has observed that the subsidised deduction made by the applicant from the employees who are availing food in the factory/corporate office would not be considered a supply.

The applicant is in the business of manufacturing, supplying, and distributing various pharmaceutical products. The applicant has 1,200 employees in their factory and is registered under the provisions of the Factories Act of 1948. The applicant is required to comply with all the obligations and responsibilities cast under the provisions of the Factories Act.

The employees are charged only for the days on which the employee has punched his ID card, and an amount equal to a predetermined percentage shall be deducted from the salary payable to the respective employee. The deduction was credited to the expense account in which the canteen expense was booked while the full amount of the invoice issued by the Canteen Service provider was booked as an expense in the applicant's profit & loss account without taking the benefit of the ITC of the GST paid on the Canteen Service Provider's invoice.

The applicant sought an advance ruling on the issue of whether the subsidised deduction made by the applicant from the employees who are availing food in the factory/corporate office would be considered as a supply.

The AAR has observed that the applicant was providing a canteen facility to its permanent employees (on payroll) as per the contractual agreement between the employer and employee relationship.

The AAR ruled that the provision of the services of transportation and canteen facilities cannot be considered as a supply of goods or services and hence cannot be subjected to GST.

Case No: GUJ/GAAR/R/2022/42

Dated: 28.09.2022

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