No GST On Subsidised Deduction made From Employees Availing Food in Factory Or Corporate Office: Gujarat AAR

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The Gujarat Authority of Advance Ruling (AAR) has ruled that GST is not payable on the subsidised deduction made by the applicant from the employees who are availing food in the factory/corporate office.

The applicant is in the business of manufacturing, supplying, and distributing various pharmaceutical products. The applicant has 1,200 employees in their factory and is registered under the provisions of the Factories Act of 1948. The applicant is required to comply with all the obligations and responsibilities cast under the provisions of the Factories Act 1948.

The employees are charged only for the days on which the employee has punched his ID card, and an amount equal to a predetermined percentage shall be deducted from the salary payable to the respective employee. The deduction was credited to the expense account in which the canteen expense was booked while the full amount of the invoice issued by the Canteen Service provider was booked as an expense in the applicant's profit & loss account without taking the benefit of the ITC of the GST paid on the Canteen Service Provider's invoice.

The applicant sought an advance ruling on the issue of 

Whether the subsidised deduction made by the applicant from the employees who are availing food in the factory/corporate office would be considered as a supply  and liable for GST.

The AAR has observed that the applicant was providing a canteen facility to its permanent employees (on payroll) as per the contractual agreement between the employer and employee relationship and also in compliance of obligations and responsibilities cast under the provisions of the Factories Act 1948.

The AAR ruled that the provision of the services of canteen facilities cannot be considered as a supply of goods or services to their employees ( Schedule – III) as they are neither Activities pertaining to Supply of Goods or Services and hence cannot be subjected to GST.


Well………..

I presume that similar concept can be extended to employees TRANSPORTATION SERVICE also equally 


Food for thought!


SRIVATSAN.R.

GST-Chennai


PS:-  Ref:- Case No: GUJ/GAAR/R/2022/42, dated:28th September 2022.

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