Applicability of GST on Amount Recovered from Employee on account of Canteen Services- AAR Gujarat
by ReinHeads Team | Feb 1, 2021
AAR Gujarat*- Applicability of GST on Amount Recovered from Employee on account of Canteen Services
| Facts |
- Amneal Pharmaceuticals Pvt. Ltd. (‘the Applicant’) is a 100% Export Oriented Unit and is carrying out canteen facilities through third party canteen service at its factory for employees at subsidized rate. The supply of such canteen facilities by the Applicant to its employee is obligatory under the Factory Act, 1948 (‘Factory Act’)
- In respect of canteen facilities provided, the employee’s share of the cost is being deducted from their salary by the Applicant and paid to the third party canteen service provider without making any profit
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| Issue before the AAR |
- Whether GST is applicable on amount recovered by the Applicant from employee on account of provision of third party canteen services which is obligatory under the Factory Act?
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| Discussion and Findings of the AAR |
· The AAR held that amount recovered by the Applicant from employee on account of provision of third party canteen services which is obligatory under the Factory Act is subject to GST on the following basis:
- Section 2(83) of the Central Goods and Service Tax Act, 2017 (‘CGST Act, 2017’) defines the term ‘outward supply’ to mean supply of goods or services whether by sale, transfer, barter, exchange, licence, rental, lease or disposal or any other mode, made/ agreed to be made by such person in the course or furtherance of business
- ‘Business’ includes any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit and any activity or transaction in connection with or incidents or ancillary to such activity. Supply of food by the Applicant to its employees would be considered as a transaction incidental or ancillary to the main business
- Even though there is no profit earned by the Applicant on the supply of food to its employee, it would still qualify as ‘supply’ under Section 7(1)(a) of the CGST Act, 2017
- Since the Applicant recovers the cost of food from its employees, there is ‘consideration’, as defined in Section 2(31) of the CGST Act, 2017
- Recovery of amount from employee would come under the definition of ‘outward supply’ as defined in Section 2(83) of the CGST Act, 2017.
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*Advance Ruling No. GUJ/GAAR/R/51/2020 dated 30 July 2020 (The Authority for Advance Ruling, Gujarat)
