GST to be levied on recovery of food expenses by employer from employees:Advance Ruling by Kerala Authorities

GST to be levied on recovery of food expenses by employer from employees:Advance Ruling by Kerala Authorities GST to be levied on recovery of food expenses by employer from employees as confirmed in Advance Ruling. Applicability of GST on canteen services has been confirmed by advance ruling authority under GST. Facts of the case

M/s. Caltech Polymers Pvt. Ltd (the applicant), engaged in manufacture and sale of footwear, also provides canteen service exclusively to its employees. The said service is provided to comply with the provisions of Factories Act, 1948, wherein any factory which employees more than 250 workers is required to provide canteen facility to its employees. Further, all the canteen expenses are incurred by the company and recovered from employees without any profit margin.

An application has been filed for determining whether the recovery of food expenses from employees for the canteen provided by company comes under the definition of outward supplies which are taxable under GST Act 2017.

Discussion Company has argued that the said activity does not fall within the scope of supply as the same is not in the course or furtherance of business and is being provided pursuant to a statutory requirement. Further, the said activity was exempted from service tax under erstwhile indirect tax regime vide Notification No. 25/2012 ST dated 20.06.2012.

The Authority for Advance Ruling (hereafter mention as AAR) while delivering the ruling has acknowledged that although the said activity was exempted under service tax regime but no similar provision exist under GST law. Further, the AAR has highlighted that the said activity of supply of food by the applicant to its employees is covered under clause (b) of section 2(17)of CGST Act [definition of business] as a transaction incidental or ancillary to the main business.

The AAR has concluded that the said activity and applicant are duly covered under definition of supply and Supplier under GST Act,2017. Further, since the applicant recovers the cost of food from its employees, there is consideration within the meaning of Section 2(31) of CGST Act, 2017.

Conclusion

In the above background,it was ruled that the recovery of food expenses from employeesfor canteen services provided by the Company falls under the definition of outward supply and therefore,taxable as supply of service under GST.

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