GST Not Leviable On Employees' Portion Of Canteen Charges: AAR

The two-member bench of Amit Kumar Mishra and Atul Mehta has observed that GST is leviable on the amount representing the contractual worker portion of canteen charges, which is collected and paid to the canteen service provider.

The applicant provides canteen facilities to its employees and workers as per the Factories Act, 1948. Section 46 stipulates that any factory employing more than 250 workers is required to provide a canteen facility to its employees. As a result, the company makes arrangements to provide food (lunch and dinner) for the employees and workers at the plant and godown location.

The applicant made arrangements for food (lunch and dinner) through an outside party, who prepares the food and supplies it to the company's employees and the contractual workers. The food supplier raises an invoice for the food bill as per the agreed billing frequency by charging 5% GST.

The applicant provides the canteen facility at a subsidised rate of 50% to its employees and contractual workers. The food supplier raises the invoice amount to the company against food supplied to the employees. The company bears 50% of the food amount and recovers the balance 50% of the food amount from the employee's salary pay out.

The applicant has sought an advance ruling on the issue of whether GST shall be applicable on the amount recovered by the company from employees or contractual workers when the provision of third-party canteen service is obligatory under section 46 of the Factories Act, 1948.

Another question raised was whether the ITC of GST paid on the Canteen Service Provider's food bill would be available, given that providing the canteen facility is mandatory under Section 46 of the Factories Act, 1948.

The AAR held that recovery of the amount from contractual workers on account of third party canteen services provided by the applicant would come under the definition of "outward supply" as defined in Section 2(83) of the CGST Act, 2017 and therefore be liable to tax as a supply under GST.

The AAR observed that the ITC of the GST paid on canteen charges is available to the applicant on the food supplied to the employees of the applicant company. As such, under Section 46 of the Factories Act, it is mandatory to provide canteen facility to the employees.

Applicant's Name: M/s. Troikaa Pharmaceuticals Limited,

Dated: 10.08.2022

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