The Karnataka Authority of Advance Ruling (AAR) ruled that paying part consideration towards the cost of lunch, refreshments to employees through contractors does not amount to supply.
The applicant, Dakshina Kannada Co-Op Milk Producers Union Ltd. is purchasing stainless steel cans of 40 liters capacity for resale of the same to members for storage of milk. The steel cans are purchased from outside the state. The supplier of the stainless steel can was classifying the same under HSN code 7310 and IGST was collected at the rate of 18%. However recently the said supplier has started to classify the same under HSN code 7323 and IGST is collected at the rate of 12%.
The applicant sought the advance ruling on the issue of whether the provision of subsidized lunch and refreshments to employees through contractors is to be treated as supply and if yes under which tariff classification it has to be classified.
The two-member bench of Dr. M.P.Ravi Prasad and Mashood Ur Rehman Farooqui ruled that the applicant merely pays the part consideration towards the cost of lunch and refreshments to their employees through contractors and hence the said activity does not amount to supply, in terms of Section 7(i)(c) of the CGST Act 2017.
“The contractor collects part of the value of the bill (consideration towards service) from the employees along with the GST @ 5%, under SAC 9963, and the remaining part from the applicant along with the GST @ 5%, under SAC 9963. The applicant, in the instant case, merely pays part of the value of the canteen bill, on behalf of the employees, and is not involved in the provision of any supply to the contractor. Thus the instant activity of the applicant does not amount to supply in terms of Section 7(1) of the CGST Act 2017,” the AAR said.
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