AAR Gujarat Clarifies GST Applicability on Subsidised Canteen Charges for Employees and Contract Workers

The present application has been filed by a company named M/s. Zydus Hospira Oncology Private Limited (Applicant) before the Gujarat Authority for Advance Ruling Goods and Services Tax, D/5, Rajya Kar Bhavan, Ashram Road, Ahmedabad.

The Gujarat Authority for Advance Ruling Goods and Services Tax, D/5, Rajya Kar Bhavan, Ashram Road, Ahmedabad (AAR) issued Advance Ruling No. GUJ/GAAR/R/2025/49 concerning the treatment of canteen facilities provided by M/s Zydus Hospira Oncology Pvt Ltd to employees and contractual workers.

M/s Zydus Hospira Oncology Pvt Ltd is a pharmaceutical company in Ahmedabad, operating in a Special Economic Zone (SEZ). It provides canteen facilities for employees and contractual workers, run by a third-party Canteen Service Provider (CSP).

However, a predetermined portion of meal costs is deducted from employees’ salaries. And amounts for meals are deducted from payments to contractors or via coupons.

Questions asked by applicant

The applicant asks the following questions, seeking the Gujarat Authority for Advance Ruling:

“Question 1: Whether the subsidised deduction made by the applicant from the employees and workers towards the canteen facility provided by the canteen service provider at the canteen facility would be considered as a ‘supply’ by the applicant under the provisions of Section 7 of the CGST Act, 2017 and the GGST Act, 2017.

Question 2: Whether GST is payable on the amount recovered as a deduction from the salaries of employees to worker contractors or an open market value?”

AAR’s Decision on the Classifications

The Gujarat Authority For Advance Ruling on Goods and Services Tax gave the following answers to the questions asked by the applicant:

Answer 1 (i): If a company deducts money from its employees’ salaries for using a canteen provided by a separate canteen service provider, this deduction is not considered a “supply” of goods or services by the company under Section 7 of the CGST Act, 2017 and GGST Act, 2017.

(ii) If a company deducts money from its workers’ salaries for using a canteen provided by a separate canteen service provider, this deduction is considered a “supply” of goods or services by the company under Section 7 of the CGST Act, 2017 and GGST Act, 2017.

Answer 2: If a company deducts some money from what it pays to a worker’s contractor, that deducted amount is subject to GST.