BlogGSTNo GST Leviable On Canteen Charges Service To Employees

August 25, 2021by Shyam Agarwal
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In the recent ruling by Gujarat Authority of Advance ruling ruled that no GST shall be levied on the amount representing employee’s portion of canteen charges.

The ruling sought by M/s Tata Motors Ltd. on the employee’s portion of canteen charges.

Facts

In the application for ruling the company said that the company is recovering a nominal amount on monthly basis to ensure the use of canteen facility only by authorized person or employee and expenditure incurred towards canteen facility borne by applicant is part and parcel of cost to the company.

In a press release dt 10.07.2017 also, it was clarified that supply by the employer to an employee in terms of contractual agreement of employment (part of salary/CTC) is not subject to GST.

Once an employee ceases to be in employment with applicant, he/she is not authorized to use the canteen facility.

In other words, the employer-employee relationship is a must to avail this facility.

Further the, applicant has submitted that they are in the business of providing canteen services and hence recovery of nominal amount will not fall in the definition of supply. The applicant submitted that they deducted a nominal amount from the employee’s salary for availing canteen facility.

In other words, the difference between the amount paid to service provider and the amount recovered from the employees is the cost to the company as salary cost.

The applicant sought the advance ruling on the issue of whether input tax credit is available to applicant on GST charged by the service provider on canteen facility provided to employees working in a factory and whether GST is applicable on the nominal amount recovered by applicants from employees for the usage of canteen facility.

Ruling

The AAR ruled that ITC on GST paid on canteen facility is blocked credit under section 17(5)(b)(i) of CGST act and inadmissible to the applicant.

GST at the hands of the applicant, is not leviable on the amount representing the employee’s portion of canteen charges which is collected by the company and paid to the canteen service provider.

Key Takeaways

The services provide by the company to employees in nature of canteen facility then any amount received by the company on behalf of canteen service provider, then the same shall not be chargeable to GST.

On the other hand, the company is not liable to ITC on the GST charged by the canteen service provider as it is a block credit.

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This article has been contributed by:

Shyam Sunder Agarwal

Manager- Accounting & Compliance

Further, we shall be happy to assist in case of any clarifications. For a deeper discussion, feel free to revert us at services@knmindia.com

Disclaimer: Information in this note is intended to provide only a general update of the subjects covered. It is not intended to be a substitute for detailed research or the exercise of professional judgment. KNM accepts no responsibility for loss arising from any action taken or not taken by anyone using this publication.

Shyam Agarwal

KNM Management Advisory Services Pvt. Ltd.Corporate Office
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