AAR: GST Applicability on Transportation and Canteen Facilities by an Employer to its Employees at Subsidized Rates

The Telangana Authority for Advance Ruling (AAR, Telangana) has clarified that goods and services tax (GST) will not apply to canteen and transportation services provided to employees at supporting rates.

The company viz. M/s. Kirby Building Systems and Structures India Pvt. Ltd., Plot No.8 To 15, IDA, Phase-III, Pashamylaram, Sangareddy, Telangana-502, 307 (36AACCK5926G2ZH), filed an application seeking clarification following Section 97(1) of the TGST Act, 2017, read with Rule 104 of the CGST/TGST Rules.

M/s. Kirby Building Systems and Structures India Private Limited is engaged in the manufacturing and supply of pre-engineered constructions and warehouse racking systems.

The company stated that it offers canteen and transportation services to its employees at supported rates considering the terms of the consensus of employment. The applicant submitted copies of the employment contract, indicating that the organization would furnish transportation and canteen services at subsidized GST rates per the guidelines.

Here Are the Questions and Decisions

Question 1: Is GST applicable on the recoveries made by the company from its employees for the canteen facilities provided to them?

The canteen services provided by the employer to their employees, as per the contractual agreement, are considered perks concerning employment. Therefore, these perks offered by the employer to the employee will not attract GST. However, if the employer charges consideration for providing canteen services as a taxable supply for business purposes, GST will be applicable as per the provisions of the CGST/TGST Act 2017.

Question 2: Is the applicant eligible to demand the input tax credit for the GST paid on inward supplies used for offering canteen services?

According to Section 17(5)(b) of the CGST/TGST Act 2017, input tax credits for canteen facilities will be available if the employer must provide them to employees under the Factories Act, 1948.

Question 3: Is GST applicable on the recoveries made by the company from its employees for the transportation perks provided to them?

Transportation services provided by the employer to the employee, as per the contractual agreement, will not attract GST as they are considered perks or prerequisites.

Read Also: GJ AAR: Not Liable to Pay GST, If Employees’ Share of Canteen Charges Collected by CSP

However, if the employer charges consideration for providing transportation services as a taxable supply for business purposes, GST will be applicable as per the provisions of the CGST/TGST Act 2017.