Are you one of those employees who loves his or her office brunch? Well, then there is a bad news for you. No, we don’t mean that your office won’t be able to run canteen services but thanks to GST your sojourn with your colleagues in your office canteen got just a little expensive.
The same was confirmed by the Authority for Advance Rulings during one of its hearing on a plea from Caltech Polymers, a Kerala-based footwear manufacturer. The AAR which is a quasi-judicial body is responsible for resolving taxpayers concern on tax liabilities.
Caltech Polymers who was running canteen services for its employees at minimal operational cost and zero profit, approached the AAR to seek clarity on the potential tax liabilities on the zero-profit canteen facilities within the company’s premises. The AAR in its ruling on the matter stated that despite no profit as claimed by Caltech Polymers, the canteen services will still be considered as supplies under the GST Act.
The AAR in its ruling clearly said, “Recovery of food expenses from the employees for canteen services provided by the company would come under the definition of ‘outward supply’ as defined in Section 2 (83) of the Act, 2017, and therefore, taxable as a supply of service under GST“.
In addition to Metros, many private sector companies in Tier-1 and Tier-2 cities give meal services to their employees and in return charge minimal operational cost. The ruling from AAR could put an end to these employee-friendly practices as well as increasing compliance burden on companies.
The previous regime, however, had exempted such services from the VAT ambit. However, the concern has resurfaced since the GST was implemented on July 1st, 2018. It will be for time to decide whether the GST Council pays to heed grievances of private sector companies as well as their employees.
Read Also: Post GST Impact: Corporates Are Not Providing Stationery To Employees
AAAR Rules GST Applicability on Food to Employees
In a recent decision by the Appellate Authority for Advance Ruling (AAAR), it is given that the food canteen providing food to the employees is liable for GST. In the previous ruling in which Caltech Polymers said that they were providing foods services without any profit margin is now ruled out and it is now mandatory for the companies to pay GST.
