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

GST for the applicant does not get levied on the amount which shows the portion of canteen charges of the employees collected via the applicant to the canteen service provider (CSP), Gujarat Authority for Advance Rulings (AAR) articulated.

The Applicant is involved in the production and distribution of mining and construction equipment in India, with factories and business operations in various locations across the country. They employ over 250 workers, including contract laborers, at their factory and are compliant with the Factories Act, of 1948.

Read Also: GJ AAR: Canteen Charges for Workers Will Not Attract GST

According to Section 46 of the Factories Act, 1948, the Applicant is legally required to provide canteen facilities for their employees, and for their contract workers, on their factory premises.

The Applicant argues that they are simply ensuring that their employees and contract workers have access to food at their factory’s canteen, as mandated by Section 46 of the Factories Act, 1948. They only collect a subsidized amount from these individuals to cover the actual expenses associated with providing the canteen services, without making any profit.

The Applicant contends that this collection from employees and contract workers should not be treated as payment for canteen services provided by them. They believe that Goods and Services Tax (GST) should not apply to the amount collected from employees to cover their share of the canteen charges recovered via the applicant from its employees.

The Authority Bench has determined that the subsidized deductions made by the Applicant from employees who use the factory’s canteen will not be considered a ‘supply’ under section 7 of the CGST Act, 2017.

However, this ruling specifically applies to permanent employees.

Similar: Gujarat AAR: No GST Levy on Canteen & Buses Used by Employees

In conclusion, the Gujarat Authority for Advance Ruling (AAR) has recently ruled that the Applicant is not liable to pay GST on the portion of canteen charges collected from employees, which is then passed on to the Canteen Service Provider (CSP).