GST on Employee Canteen Services: Gujarat AAR
Case-: M/S. Suzuki Motor Gujarat Pvt Ltd., 2024 (2) TMI 848 – AAR, Gujarat.
In this case the applicant-assessee employ more than 250 employees who have been provided with canteen facility in terms of section 46 of Factories Act, 1948. The Factories Act of 1948 requires employers to offer certain facilities, including canteen services, for factories with more than 250 employees; however, for others, it is voluntary and supplied as a goodwill gesture. Assessee provide canteen facility to their employees and bears 70 percent of cost and rest is borne by said permanent employees.
Ruling
GST on Recoveries for Canteen Services from Employees
The AAR decided that the portion of the amount recovered by Suzuki Motor Gujarat Pvt Ltd. from its permanent employees towards canteen facilities is not liable to GST. Supply of food to permanent employees, though involving recovery, is not deemed a taxable supply under GST legislations. However, the AAR also held that GST may be applicable on recoveries from deputed employees and non-permanent workers. The ruling asserts that recovery from non-permanent employees falls under the definition of ‘outward supply’.
Permanent Employees eligibility for ITC on Canteen Services
The applicant’s eligibility to avail ITC on GST charged by the canteen service provider for facilities provided to its permanent employees was affirmed. This eligibility is grounded in the amendments to Section 17(5)(b) of the CGST Act, effective from 1st February 2019, and further clarified by CBIC circular No. 172/04/2022-GST dated 6.7.2022. The provisions of Section 46 of the Factories Act, 1948, and the Gujarat Factory Rules, 1963, underscore this entitlement, albeit with the limitation that the ITC is available only to the extent of the cost borne by the employer, excluding the portion recovered from employees.
ITC Eligibility on Canteen Services to Employees on Deputation and Temporary Workers
The applicant is not eligible to avail ITC in respect of the GST charged by the canteen service provider for the canteen facilities provided to employees of SMC on deputation, employees of MSIL on business travel and temporary workers.
ITC on Inputs Utilized for Canteen Facilities
The applicant is not eligible to avail ITC in respect of the in-puts i.e. equipment and kitchen utensils utilized for providing canteen facilities.
The copy of the order is as under:
From,
Krishnakant Jakhotia
Mobile No :- 9422507911
Email Id :- taxtalknew@gmail.com
