No GST applicable on salary deducted in lieu of notice period from full and final settlement of employees: AAR

The applicant is engaged in the manufacture, sale and trading of automotive parts and provides products and services to the Indian and global automotive OEMs as well as other Tier I suppliers.

In view of the foregoing, the applicant has filed this application, seeking advance ruling on the below mentioned questions:

1a. Whether the deduction of nominal amount by the applicant from the salary of the employees who are availing facility of food provided in the factory premises would be considered as a ‘supply of service’ by the applicant under the provisions of section 7 of CGST & GGST ?

1b. In case answer to above is yes, whether GST is applicable on the nominal amount to be deducted from the salaries of employees?

1c. Whether ITC is available to the applicant on GST charged by the CSP for providing the catering services?

2a. Whether the services by the way of non air conditioner bus transportation facility provided by transport service providers would be construed as ‘supply of service’ by the applicant to its employees under the provisions of section 7 of CGST and GGST?

2b. Whether ITC is available to the applicant on GST charged by the transport service providers for providing the non air conditioned bus transportation services?

3. Whether GST is applicable on salary deducted in lieu of notice period from the full and final settlement of the employees leaving the company without completing or serving the complete notice period as specified in the appointment letter?

Advance Ruling:

1(a). The deduction of the amount by the applicant from the salary of the employees who are availing the facility of food provided in the factory premises would not be considered as a ‘supply’ under the provisions of section 7 of the CGST Act, 2017, and the GGST Act 2017.

1(b). Since the answer to the above is not in the affirmative, the ruling sought in respect of the question listed at 1(a) is rendered infructuous.

1(c). Input Tax Credit (ITC) will be available to the applicant on GST charged by the service provider in respect of canteen facility provided to its employees other than contract employees working in their factory, in view of the provisions of Section 17(5)(b) as amended effective from 1.2.2019 and clarification issued by CBIC vide circular No. 172104/2022-GST dated 6.7.2022 read with provisions of section 46 of the Factories Act, 1948 and read with provisions of Gujarat Factory Rules, 1963. ITC on the above is restricted to the extent of the cost borne by the applicant for providing canteen services to its employees but disallowing proportionate credit to the extent embedded in the cost of goods recovered from such employees.

2a. The services by the way of non-air conditioned bus transport facility provided by TSPs would not be construed as the supply of service by the applicant to its employees under the provisions of section 7 of the CGST Act, 2017, and the GGST Act 2017.

2b. ITC is available to the applicant on GST charged by the TSPs for providing the non-air conditioned bus transport services however subject to the condition that the buses hired are more than l3 seater wef 1.2.2019. ITC on the above is restricted to the extent of the cost borne by the applicant for providing transportation services to its employees but disallowing proportionate credit to the extent embedded in the cost of goods recovered from such employees.

3. No GST is applicable on salary deducted in lieu of the notice period from the full and final settlement of the employees leaving the company without completing or serving the complete notice period as specified in the appointment letter.

For Official Ruling Download PDF Given Below: