Gujarat AAR: No GST leviable on the Employee Portion of Canteen Charges

The Gujarat Authority of Advance Ruling (AAR) ruled that Goods and Services Tax (GST) shall not be levied on the employee portion of canteen charges. M/s Tata Motors Ltd. (applicant) is recovering a nominal amount every month to ensure the use of the canteen facility only by authorized employees.

The applicant explained that the expenditure incurred towards the canteen facility borne by the applicant is part of Cost To Company (CTC). Also, once an employee ceases to be in employment with the applicant, they cannot use the canteen facility. In simple words, there should be an employer-employee relationship to avail this facility.

The applicant cited the press reports dated 10th July 2017 issued by the department that the supply made by the employer to an employee in terms of an employment agreement is not subject to GST. The applicant has informed that they are not in the canteen service business and the recovery of nominal amount will not fall in the definition of “supply”. A similar view was already upheld by Maharashtra AAR in Jotun India (P) Ltd- 2019-TIOL-312-AAR-GST.

The applicant informed them that they deducted a nominal amount from the employee’s salary and paid the canteen service provider. Hence, the difference between the amount paid to the service provider and the amount recovered from employee’s is part of the CTC.

The applicant has sought the advance ruling on the following issues:

Whether Input Tax Credit (ITC) is available to the applicant on GST charged by service provider on canteen facility provided to factory employees?

Is GST applicable on the nominal amount recovered from employees by applicants? 

The AAR ruled that ITC on GST paid on canteen facility falls under the blocked credits under Section 17(5) of CGST Act, and hence the applicant can not claim the same. Also, the AAR ruled that GST is not levied on the canteen charges when collected from employees by the applicant and paid the same to the canteen service provider.

For any clarifications/feedback on the topic, please contact the writer at dvsr.anjaneyulu@cleartax.in