The Gujarat Authority of Advance Ruling (AAR) held, that no GST will be charged on the employee’s portion of canteen charges. In a two-member bench of Amit Kumar Mishra and Atul Mehta, GST is imposed on the amount representing the contractual worker portion of canteen charges, which is collected and paid to the canteen service provider.
The petitioner furnishes the utilities of the canteen to its employees and workers under the Factories Act, of 1948. Section 46 mentioned that any factory that has an employee exceeding 250 workers is needed to furnish the canteen utility to its employees. As an outcome, the company arranges to furnish the food (lunch and dinner) for the employees and workers at the plant and godown location.
The petitioner arranges, food via an outside party that makes the food and supplies for the employees of the company and the contractual workers. The supplier of the food asks for an invoice under GST for the food bill according to the agreed billing frequency via imposing a 5% GST.
The petitioner furnishes the canteen utility at an exempted rate of 50% to its employees and the workers work on a contractual basis. The supplier of the food asks for the invoice amount from the company with respect to foods supplied to the employees. 50% of the food amount would beared by the company and recovers the balance 50% of the food amount via the salary of the employees.
The petitioner seeks an advance ruling on the basis of whether GST would be subjected to applied the amount recovered via the company from employees or the workers on the contract when the provision of the 3rd party canteen service would be responsible under section 46 of the Factories Act, 1948.
The additional question is if the ITC (Input Tax Credit) of the GST furnished on the Canteen Service Provider’s food bill is being available provided that the given canteen utility is compulsory under Section 46 of the Factories Act, 1948.
AAR, recovery of the amount from the contractual workers on the basis of the 3rd party canteen services furnished via petitioner will come beneath the description of the outward supply as mentioned in Section 2(83) of the CGST Act, 2017 and hence obligated to tax as a supply under GST.
AAR revealed that ITC of the GST furnished on the canteen charges would be available to the petitioner on the food given to the employees of the applicant company. Similar to under Section 46 of the Factories Act, it is compulsory to provide the facilities of the canteen to the employees.
