A significant ruling of Gujarat Authority for Advance Ruling ( AAR ) has held that nominal salary deductions for on-site factory food are not classified as a ‘supply’ under the Central Goods and Service Tax ( CGST ) Act.
The two member bench comprising Milind Kavatkar ( member of SGST ) and Amit Kumar Mishra ( Member of CGST ) hold that the deduction of nominal amount made by the applicant from the salary of the employees who are availing the facility of food provided in the factory premises would not be considered as a supply’ under the provisions of Section 7 of the CGST Act, 2017.
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The issue to be decided was whether the deduction of a nominal amount made by the applicant from the salary of the employees who are availing the facility of food provided in the 1-factory would be considered as a supply of services by the applicant under the provisions of Section 7 of the CGST Act, 2017.
The applicant is engaged in the business of manufacture and sale of industrial products. The applicant states that they have employed more than 500 employees and are also registered under the Factories Act, 1948.
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The applicant further stated that they have engaged a canteen service provider [ CSP ] for preparing and supplying food to their employees. The applicant recovers Rs. 338/- on monthly basis from each employee in respect of the food being prepared and supplied by the CSP.
Further, the applicant stated that in terms of section 46 of the Factories Act, 1948, since they have employed more than 500 employees, they are mandated to provide canteen for their employees; that they have ultimate control of affairs of the factory & would be considered as an ‘occupier’; that they have set up canteen facility having a separately demarcated area in the factory premises pursuant to & in compliance with the Factories Act; that the canteen facility has seating area with tables and chairs, cooking facility with utensils, refrigeration, storage rooms for keeping the cooked food, washrooms and wash basin, etc..
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The applicant has filed this application for advance ruling to ascertain the GST implication in respect of canteen facility being provided to employees.
The authority bench ruled that “the deduction of nominal amount made by the applicant from the salary of the employees who are availing the facility of food provided in the factory premises would not be considered as a ‘supply’ under the provisions of Section 7 of the CGST Act, 2017 and the GGST Act, 2017”.
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