GST not Payable on Recoveries made from Employees towards providing Canteen Facility at Subsidized Rates in Factory and Office: AAR [Read Order]

GST - not payable - employees - canteen facility - subsidized rates - factory - office - AAR - Taxscan

The Maharashtra Authority of Advance Ruling (AAR) has ruled that the GST is not payable on recoveries made from employees towards providing canteen facility at subsidized rates in factory and office.

The Appellant, M/s Emcure Pharmaceuticals Limited is a pharmaceutical company that has engaged in developing, manufacturing, and marketing pharmaceutical products provides canteen and bus transportation facility to its employees as a part and parcel of the employment arrangement vide letter of employment (Employment Agreement) to employees, which contains the terms & conditions of employment as per its HR Policy.

The applicant has sought the advance ruling on the issue ​​of whether the GST would be payable on recoveries made from the employees towards providing canteen facility at subsidized rates in the factory and office; Whether the GST would be payable on the recoveries made from the employees towards providing bus transportation facility? If yes, whether the Applicant is exempted under Notification No. 12/2017 Central Tax (Rate) and whether the GST would be payable on the notice pay recoveries made from the employees on account of not serving the full notice period.

The Coram of Rajiv Mangoo and T.R.Ramnani noted that the employee opting to resign by paying an amount equivalent to a month of salary in lieu of notice, has acted in accordance with the contract and that being the case no question of any forbearance or tolerance does arise. Further, as per the agreement, the resignation by the employee is not subject to any acceptance or approval and the employee is free to tender his resignation, make payment of notice period salary to leave. Hence, there is neither any activity nor any passive role played by the employer. It must be noted here, that there is no consideration within the meaning of Sec.2(31)(b) of the CGST Act, 2017 flowing from an act of forbearance in as much as there is no breach of contract, as a question of any consideration for forbearance would arise in case of breach of contract.

The AAR ruled that GST would not be payable on recoveries made from the employees towards providing canteen facility at subsidized rates in the factory and office. Further, no GST would be payable on the recoveries made from the employees towards providing a bus transportation facility.  GST would not be payable on the notice pay recoveries made from the employees on account of not serving the full notice period.

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In Re: M/s Emcure Pharmaceuticals Limited

CITATION:   2022 TAXSCAN (AAR) 155

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