No GST Leviable In The Hands Of Employer On Amount Representing Employees Portion of canteen charges: Gujarat AAR

The applicant, M/s. Cadila Healthcare Limited, is in the business of manufacturing, supplying, and distributing various pharmaceutical products. M/s. Cadila has approximately 7,200 (approx.) employees in its factory and corporate offices and was registered under the provisions of Section 46 of the Factories Act, 1948. As per the provisions, M/s. Cadila submitted that it was mandatory to provide canteen facilities to its employees at the factory and provide canteen facilities to its employees at the factory by appointing a Canteen Service Provider to comply with the statutory requirement laid down under the Factories Act.

M/s. Cadila and Canteen Service Provider have entered into an agreement whereby M/s. Cadila shall pay the full amount to the service provider for the food served during a prescribed period on behalf of the employees and a predetermined percentage of the amount paid by the M/s. The balance amount was recovered from the employees (without any profit) and the balance amount was borne by M/s. Cadila. It is being treated as a staff welfare expense towards subsidised food served to the employees.

The applicant has sought an advance ruling on the issue of whether the subsidised deduction made by the applicant from the employees who are availing food in the factory/corporate office would be considered as a supply by the applicant under the provisions of Section 7 of the Central Goods and Service Tax Act, 2017 and the Gujarat Goods and Service Tax Act, 2017.

The applicant submitted that merely setting up a canteen facility for the employees and deducting a nominal cost would not tantamount to supply under Section 7 of the CGST Act.

The AAR noted that Cadila has arranged a canteen for its employees, which is run by a canteen service provider. As per their arrangement, part of the canteen charges were borne by M/s. Cadila, whereas the remaining part was borne by its employees. The employees' portion of the canteen charges were collected by M/s. Cadila and paid to the canteen service provider. M/s. Cadila submitted that it does not retain any profit margin in this activity of collecting employees' portion of canteen charges.

"We are not inclined to accord this canteen service facility provided by M/s Cadila to its employees the status of an activity made in the course or furtherance of business to deem it a supply by M/s Cadila to its employees," the AAR said.

Applicant' Name: M/s. Cadila Healthcare Limited

Citation: ADVANCE RULING NO. GUJ/GAAR/R/2022/19

Dated: 22/03/22

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