Firms are not needed to furnish the GST on employees’ share towards the canteen services and the transportation services, Gujarat’s Authority for Advance Ruling (GAAR) mentioned. The specified ruling would be made on two separate applications submitted by the pharmaceutical companies. Cadila and Emcure, correspondingly.
“GST, at the hands of Cadila, is not leviable on the amount representing the employees’ portion of canteen charges, which is collected by Cadila and paid to the canteen service provider, GAAR specified in its ruling.”
But AAR ruling is binding on the applicant and jurisdictional tax council, it still poses compelling value in the identical concern, and sometimes these rulings compel the tax administration to revise the law or rules. Appeals with respect to the AAR rulings would be made in Appellate authority Appellate Authorities for Advance Ruling (AAAR) and after that in the High Court.
A pharma company with 7000 employees to AAR mentioned that it is essential to furnish a canteen utility for its employees. As per that it has set a canteen service provider to follow with the law needs that come beneath the Factories act.
The company and the service provider inserted an agreement in which it was mentioned that the firm would furnish the effective service provider for the food served. But, some amount furnished via company gets recovered from the employees. While the balance amount is treated for the welfare of the staff expense for subsidized food given to the employees.
The firm seeks to find out if the subsidized deducted formed by employees claiming the canteen utility comes beneath the GST.
If the answer is negative then the GST subjected to apply is on which part that is amount furnished by the applicant to the canteen service provider or on the amount recovered from the employees?
AAR specified that the employee’s part of the canteen charges is accumulated by Cadila and furnished to the canteen service provider. The same mentioned that the firm’s submission in which it was specified that it would not leave with itself any profit margin in this activity of accumulating employees part of canteen charges. “We are not inclined to accord this canteen service facility provided by Cadila to its employees as an activity made in the course or furtherance of business, deeming it a Supply by Cadila to its employees,” AAR stated and should not be imposed with any GST.
Emcure’s Application
Another application identical to the above is by the other pharma company but with one more issue, and that was if the free-of-cost bus transport utility furnished by the firm to its employees is subjected to tax beneath the GST laws? Does the firm qualify for GST ITC furnished for the canteen utility and the transport utility?
Not GST would be imposed neither on the employee part of the canteen charges nor on the free bus transportation utility furnished towards its employees. ITC would be levied when the GST furnished on hiring the bus with a capacity exceeding 13%, but not the GST furnished for the canteen utility.
