The Gujarat Authority for Advance Ruling (AAR) ruled that Goods and Service Tax (GST) is not applicable on the amount recovered for canteen facilities from employees. The applicant Zentiva Private Limited was a pharmaceutical and active pharma ingredient manufacturing company. The applicant has engaged canteen service providers (CSP) transport service providers (TSP) who provide food and transportation facilities to the applicant’s employees, as per the terms of company policy.
The applicant has more than two hundred and fifty workers working in its factory. As per section 46 of the Factories Act, 1948, in factories wherein more than two hundred and fifty workers are employed, a canteen shall be provided and maintained by the occupier for those of the workers. Thus by virtue of section 46 of the Factories Act, the applicant provides meals which include breakfast, lunch, snacks and dinner to its employees.
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The applicant provided canteen facilities to its employees in terms of the canteen policy dated 16.08.2023.In terms of the canteen policy, the applicant is deducting Rs. 260 /- per month from the salary of the employees towards the meals provided in the canteen and the remaining cost is borne by the applicant.
The applicant is also provided a canteen facility to Supervised Contract Employees and Third-Party Employees. In the case of Supervised Contract Employees and Third-Party Employees, the applicant recovers Its. 260/- per month per employee from contractors/manpower supply company respectively along with GST at the rate of 57 % under SAC 9963. The remaining cost of the meal is borne by the applicant.
The applicant has attached the Purchase Order issued to the CSP as Annexure I, Canteen Policy as Annexure 2, a sample copy of the tax invoice issued by CSP as Annexure 3 and a sample copy of the tax invoice raised by the applicant for discharging tax on the total amount paid to the CSP as Annexure 4 with their application.
In terms of section 7 of the CGST Act supply means all forms of supply’ of goods/services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business.
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The exception being Schedule 1, which included the activities made or agreed to be made without a consideration and Schedule III, which includes activities which shall be treated neither as a supply of goods or services.
The applicant’s case is that they employ more than 250 employees who have been provided with canteen facilities in terms of section 46 of the Factories Act, 1948. The applicant is on record that the canteen facility is being provided to supervised contract employees and third party employees apart from the permanent employees.
The tribunal held that the deduction made by the applicant from the employees who are availing food in the factory would not be considered as a ‘supply’ under the provisions of Section 7 of the CGST Act, 2017.
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The two member bench of the AAR comprising Milind Kavakar (Member of SGST) and Amit Kumar Mishra (Member of CGST) observed that GST was not liable to be discharged on the portion of the amount recovered by the Applicant from its employees towards the canteen facility provided to the employees.
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