Gujarat AAR: No GST Levy on Amount of Canteen Charges from Employees

As per the latest AAR ruling, the GST on the canteen facilities will not be recovered from the employees and the amount will be free of GST charged on the canteen item.

As per the Gujarat AAR, Tata motors recently asked to resolve an issue over the GST applicability on the canteen facility it has been provided to the employees.

Tata motors also asked about the ITC on the GST charged by the provider of services in the canteen to the employees working in the factory. The AAR ruling mentioned that Tata Motors is the provider of the canteen facility to the employees and is managed by a third-party service provider.

The contract mentions that the charges of the canteen are partially borne by both tata motors as well as the third-party service provider. Also, the tata motors collect the canteen charges from the employees and further pays it to the canteen service provider.

However, tata motors cleared that it does not keep any profit in the transfer of the amount to the service provider while collecting the amount from the employees. The AAR ruling mentions that the input tax credit (ITC) A complete guide for understanding the basics of input tax credit and it calculation with detailed examples under GST (Goods and Services Tax) India on paid GST on facilities of the canteen is blocked as per the GST act and cannot be rendered to the applicant in question.

As per the statement of AAR, “GST, at the hands of the applicant, is not leviable on the amount representing the employee’s portion of canteen charges, which is collected by the applicant and paid to the canteen service provider.”

Also, a tax expert from the tax industry mentioned that “Authority has ruled that where canteen charges are borne by the employer and only a nominal part is charged from employees, no GST would be payable on such recoveries. This ruling has enough persuasive value for all the corporate taxpayers to take a tax-efficient tax position,”.