No GST leviable on Employees Portion of Canteen Charges Collected and Paid to CSP: AAR [Read Order]

The Gujarat Authority for Advance Rulings (AAR) recently ruled that, GST, at the hands of the applicant, is not leviable on the amount representing the employees portion of canteen charges, which is collected by the applicant, to the Canteen Service Provider (CSP).

The Applicant is engaged in the manufacture & supply of mining and construction equipment. They have set up their factory & business operations at various places across India. The applicant has employed more than 250 employees including contract workers in their factory and is also registered under the Factories Act, 1948.

The applicant stated that in terms of Section 46 of the Factories Act, 1948, they are statutorily mandated to provide canteen facilities for their employees, including contract workers, at their factory premises.

The applicant contended that, that it is only facilitating the supply of food to the employees and contract workers at its canteen facility in the factory which is a statutory requirement Ws 46 of the Factories Act, 1948, and is recovering only subsidised share from its employees and contract workers towards actual expenditure incurred in connection with the canteen services which is provided by CSP, without making any profit.

It was added that the said recovery or collection of employee's and contract worker's share cannot be treated as consideration against supply of canteen services by the applicant to the

employees and contract workers. It was thus submitted that Goods and Services Tax should not be applicable on the amount representing the employee's portion of canteen charges collected / recovered by the applicant from its employees.

The Authority Bench observed that, “the subsidised 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.”

However, it was noted the aforementioned finding is only in respect of employees i.e.permanent employees.

The Gujarat AAR Bench thus ruled that, “recently ruled that, GST, at the hands of the applicant, is not leviable on the amount representing the employees portion of canteen charges, which is collected by the applicant, to the Canteen Service Provider (CSP).”

To Read the full text of the Order CLICK HERE

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