Subsidized Deduction Made From The Employees Availing Food In The Factory/Corporate Office Would Not Be Considered A 'Supply' Under GST: AAR
The Gujarat Authority for Advance Ruling (AAR) has held that a subsidized deduction made by the applicant from the employees who are availing food in the factory or corporate office would not be considered a 'supply' under the GST Act.The bench of Amit Kumar Mishra and Milind Kavatkar has observed that input tax credit (ITC) will be available to the applicant on the GST charged by the...
The Gujarat Authority for Advance Ruling (AAR) has held that a subsidized deduction made by the applicant from the employees who are availing food in the factory or corporate office would not be considered a 'supply' under the GST Act.
The bench of Amit Kumar Mishra and Milind Kavatkar has observed that input tax credit (ITC) will be available to the applicant on the GST charged by the service provider in respect of canteen facilities provided to its direct employees working in their factory and corporate office.
The applicant is in the business of manufacturing, supplying, and distributing various pharmaceutical products. The applicant has employed around 2745 full-time permanent employees in their factory and corporate office. They are also registered under the Factories Act, of 1948.
The applicant provided a canteen facility to its employees at the factory and its corporate office. The reasons provided by the applicant for providing the aforementioned facility are that, in terms of Section 46 of the Factories Act, 1948, they are mandated to provide and maintain a canteen for the use of its employees.
Since the factory premises are located far from the city limits, the applicant provides a canteen facility by appointing a canteen service provider. The employees are issued an ID card when they join, which can be used to avail of this canteen facility. They are charged only for the days on which an employee has punched his ID card, and a predetermined percentage is deducted from the salary payable to the respective employee.
The applicant sought an advance ruling on the issue of whether the subsidized deduction made by the applicant from the employees who are availing food in the factory or corporate office would be considered a 'supply' under the provisions of Section 7 of the CGST Act, 2017 and the GGST Act, 2017. Yet another issue raised was on what portion of the GST will be applicable: on the amount paid by the applicant to the canteen service provider or only on the amount recovered from the employees.
The AAR noted that the canteen facility is provided by the applicant to the full-time employees of its corporate office as mandated in Section 23 of the Gujarat Shops and Establishments (Regulation of Employment and Condition of Service) Act, 2019. The subsidized deduction made by the applicant from the employees who are availing food in the corporate office would not be considered a 'supply' under the provisions of Section 7 of the CGST Act, 2017.
The AAR held that input tax credit will be available to the appellant in respect of food and beverages as canteen facilities are obligatory to be provided under the Factories Act, 1948, read with Gujarat Factories Rules, 1963, and Gujarat Shops and Establishment (Regulation of Employment and Condition of Service) Act, 2019 as far as the provision of canteen services for full-time or direct employees working on a permanent basis at the factory or corporate office is concerned. It is further held that the ITC on GST charged by the canteen service provider will be restricted to the extent of the cost borne by the appellant only.
Applicant’s Name: M/s. Cadila Pharmaceuticals Ltd
Date: 31/03/2023