No GST Applicable on Canteen service facility provided by applicant to its employees

M/s. Cadila Healthcare Limited was engaged in the manufacture, supply, and distribution of various pharmaceutical products having 7200 employees in their factory & corporate offices, and is registered under the provisions of Section 46 of the Factories Act, 1948.

M/s. Cadila and Canteen Service Provider have entered into an agreement that M/s. Cadila shall pay the full amount to the service provider for the food served during a prescribed period on behalf of the employees and a pre-determined percentage of the amount paid by the M/s. Cadila is recovered from the employee and the balance amount is borne by M/s. Cadila is being treated as a staff welfare expense towards subsidized food served to the employees.

The authority was asked to decide whether the subsidized deduction made by the applicant from the employees who are availing of food in the factory/corporate office would be considered as a supply by the applicant under the provisions of Section 7 of the Central Goods and Service Tax Act, 2017. If yes, whether GST is applicable on the amount deducted from the salaries of its employees, or if no, then GST is applicable on which portion.

It was found that M/s. Cadila does not retain with itself any profit margin in the activity of collecting employees’ portion of canteen charges. GAAR did not accord the canteen service facility provided by M/s Cadila to its employees to be an activity made in the course or furtherance of business to deem it a Supply by M/s Cadila to its employees under S. 7 of Central Goods and Service Tax Act, 2017. Therefore, GST, at the hands of M/s Cadila, was not leviable on the amount representing the employee’s portion of canteen charges, which is collected by M/s Cadila and paid to the Canteen service provider.

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