NO GST LEVIABLE IN THE HANDS OF EMPLOYER ON AMOUNT REPRESENTING EMPLOYEES’ PORTION OF CANTEEN CHARGES: GUJ. AAR

The Gujarat Authority of Advance Ruling (AAR) ruled that no GST is leviable in the hands of the employer on an amount representing the employee portion of canteen charges.

The applicant, M/s Cadila Healthcare Ltd. is in the business of manufacturing, supplying and distributing various pharma products. M/s Cadila has approximately 7200 employees in it factory and corporate offices and was registered under the provisions of Sec. 46 of the Factories Act, 1948. As per the provisions, Cadila submitted that it was mandatory to provide canteen facilities to its employees at the factory by appointing a Canteen Service Provider to comply with the statutory requirement laid down under the Factories Act.

Cadila and Canteen Service Provider have entered into an agreement whereby Cadila shall pay the full amount to the service provider for the food served during a prescribed period on behalf of the employees and a predetermined % of the amount paid by Cadila.

The balance amount was recovered from employees (without any profit) and the difference of amount was borne by Cadila. It is being treated as a staff welfare expenses towards subsidised food served to the employees.

The applicant has 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 by the applicant under the provisions of Sec. 7 of the Central GST Act, 2017 and the Gujarata Goods and service Tax Act, 2017.

The applicant submitted that merely setting up a canteen facility for the employees and deducting a nominal cost would not tantamount to supply under Sec. 7 of the CGST Act.

The AAR noted that Cadila has arranged a canteen for its employees, which is run by a Canteen Service Provider. As per their arrangement, part of the canteen charges were borne by Cadila, whereas the remaining part was borne by its employees. The employees’ portion of the canteen charges were collected by Cadila and paid to the canteen service provider. Cadila submitted that it does not retain any profit margin in this activity of collecting employees’ portion of canteen charges.

AAR, therefore, stated that they are not inclined to accord this canteen service facility provided by Cadila to its employees the status of an activity made in the course or furtherance of business to deem it supply by Cadila to its employee and hence no GST applicable on such transactions.