The Authority of Advance Ruling Gujarat holds inapplicability of GST on the contributions made by the employee towards canteen charges - M/s Tata Motors Limited reported at 2021 (8) TMI 735.
Tata Motors, hereinafter the ‘Applicants’ or the ‘Company’, maintains canteen facility so as to provide food to its employees in the firm. This also comes from the mandatory requirement set by the Factories Act, 1948. The Applicant recovers a nominal amount on monthly basis to ensure that the use of such canteen facility is only by authorized persons/employees and expenditure incurred towards canteen facility borne by the Applicant is a part and parcel of the cost to company. That is to say, the applicant deducts only a nominal amount from employee’s salary for availing canteen facility. In other words, the difference between amount paid to service provider and amount recovered from employees is cost to company as salary cost.
Vide a press release dated 10.07.2017, it was clarified that, supply by employer to employee in terms of contractual agreement of employment (part of salary/CTC) is not subject to GST. Once employee ceases to be in employment with Applicant, he/she is not authorized to use the canteen facility. In other words, employer-employee relationship is must to avail this facility.
Placing reliance in the case of Maharashtra AAR in the case of Jotun India (P) Ltd- 2019-TIOL-312-AAR-GST, the Applicant submits that they are not in the business of providing canteen service and hence recovery of nominal amount will not fall in definition of supply at all.
1. Whether input tax credit (ITC) available to Applicant on GST charged by service provider on canteen facility provided to employees working in factory?
2. Whether GST is applicable on nominal amount recovered by Applicants from employees for usage of canteen facility?
3. If ITC is available as per question no. (1) above, whether it will be restricted to the extent of cost borne by the Applicant (employer)?
ITC on GST paid by the Applicant towards canteen facility is inadmissible by virtue of Section 17(5)(b)(i) of the Central Goods and Services Act, 2017:
“(b) the following supply of goods or services or both-
(i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) except when used for the purposes specified therein, life insurance and health insurance:
Provided that the input tax credit in respect of such goods or services or both shall be available where an inward supply of such goods or services or both is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply;”
GST, at the hands on the applicant, is not leviable on the amount representing the employees portion of canteen charges, which is collected by the applicant and paid to the Canteen service provider.