No GST on Food Amount Recovered at Subsidised Rates from Employees as per Factories Act: AAR

The applicant, M/s Plant Lipids Pvt Ltd, is engaged in the manufacturing of spice oleoresins. The company has more than 590 workers for which the company has an in-house canteen to provide a food facility to its employees, as required by Section 46 of the Factories Act, 1948. As per the company, this facility is not operated for earning profit for the business and is only for the welfare of its employees.

The company issued food coupons to all employees at subsidised rates to all employees. The company also pays Goods and Services Tax (GST) for the food supplied to the contract employees. However, the company does not pay GST for the food supplied to the permanent employees.

Questions Asked by Applicant

The applicant wanted to get advance rulings on the following questions:

1. Whether GST is chargeable on the amount recovered at subsidised rates from employees on the rolls and contract employees for providing food to them in the canteen run by the Company as mandated under the Factories Act, 1948.

2. Whether ITC can be claimed by the Company in respect of inward supplies used in the canteen for supplying food to the employees?

Kerala AAR Ruling

As per the Kerala Authority of Advance Ruling:

GST is not imposed on the amount recovered at subsidised rates from employees on the rolls and contract employees for giving food to them in the canteen operated by the Company as mandated under the Factories Act, 1948.

The company is eligible to claim a full Input Tax Credit (ITC) on all inward supplies used in the canteen, as obligated under the Factories Act, 1948. However, the company can only do the same on the condition that the GST has not been passed on to the employees of the company.