GST Not Payable On Amounts Recovered From Employees For Canteen Meals: Gujarat AAR

The Gujarat Authority for Advance Ruling has ruled that GST is not payable on amounts recovered by Torrent Pharmaceuticals Ltd. from employees towards canteen meals at its Indrad plant, R&D facility and corporate office.

The AAR held that the deductions made from employees do not amount to a “supply” under Section 7 of the CGST Act.

The Authority observed, “We hold that the deduction made by the applicant from the employees who are availing food in the factory/corporate office would not be considered as a 'supply' under the provisions of section 7 of the CGST Act, 2017.”

The ruling was delivered by SGST Member Sushma Verma and CGST Member Vishal Malani.

Torrent had sought the ruling on employee recoveries towards canteen facilities at its Indrad plant, R&D facility at Bhat, Ahmedabad, and corporate office at Torrent House, Ahmedabad.

It submitted that it had more than 250 employees at the Indrad plant and R&D facility and more than 100 employees at its corporate office.

For the Indrad plant and R&D facility, Torrent relied on Section 46 of the Factories Act, 1948, which requires a factory employing more than 250 workers to provide and maintain a canteen.

For the corporate office, it relied on Section 23 of the Gujarat Shops and Establishments (Regulation of Employment and Conditions of Service) Act, 2019. The provision requires an establishment employing 100 or more workers to provide and maintain a canteen.

Torrent's canteen policy required the cost to be shared between the company and employees. At the Indrad plant and R&D facility, the company subsidised 50% of the cost of breakfast, meals and snacks, with the employee's share deducted from salary. At the corporate office, the subsidy varied according to the employee's grade.

The canteen service provider raised invoices on Torrent and charged GST at 5%. The company submitted that it did not retain any profit margin from the amounts recovered from employees.

The AAR examined whether these employee deductions amounted to consideration for a supply by Torrent. It noted the statutory obligation to provide the canteen and considered the company's canteen policy and agreement with the service provider. For the corporate office, it similarly found that the canteen was maintained pursuant to the requirement under Section 23.

The AAR also examined Section 17(5)(b) of the CGST Act, which generally restricts ITC on food and beverages. Its proviso permits ITC where providing such food or beverages is obligatory for the employer under law.

The Authority therefore held that Torrent could claim ITC on GST charged by the canteen service provider. However, the credit was restricted to the cost borne by the company itself.

The AAR accordingly ruled that GST was not payable on the employee recoveries and that ITC was available only to the extent of Torrent's own cost.