The Uttarakhand bench of the GST Authority for Advance Rulings (AAR) in the case of Tube Investment of India Limited has recently held that the nominal sum recovered from employees for provision of subsidised canteen facilities will be subject to goods and services tax (GST). The ruling came recently in the case of an engineering company.
The bench held that the applicant, Tube Investment of India, set up canteen facilities as mandated under the Factories Act and supplies food at a nominal cost through a thirdparty vendor. The supply of such food by the applicant company is a ‘supply of service’ to its employees. This is because it is not part of the employment contract, but rather mandated by the Factories Act. The nominal cost, which is recovered from salary as deferred payment, is ‘consideration’ for the supply and GST is liable to be paid.
The authority also noted that the input tax credit on goods and services tax paid on canteen facilities is barred under section 17(5)(b)(i) of the Central Goods and Services Act, 2017, and hence inadmissible.
As reported earlier by TOI, the Tamil Nadu bench, in the case of Kothari Sugars and Chemicals, had taken an identical view. However, a large majority of rulings given by various benches have held otherwise. These include the Haryana bench, in the case of RITES, which is a company set up under the aegis of Indian Railways, or by the Gujarat bench in the case of Cadila Healthcare and Tata Motors.
In the RITES ruling, the bench held that it was mandatory for the company to provide canteen facilities under the Factories Act. So, the transaction of recovering part payment of the meals from the staff is outside the purview of ‘scope of supply’ and no GST incidence arises.
Source: timesofindia.com
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