GST on canteen and transportation facilities to its employees at subsidized rates: AAR Answers

The Telangana Authority for Advance Ruling (AAR, Telangana), has ruled out GST on canteen and transportation facilities to its employees at subsidized rates.

The company viz. M/s. Kirby Building Systems and Structures India Private Limited, Plot No. 8 To 15, IDA, Phase-III, Pashamylaram, Sangareddy, Telangana- 502 307 (36AACCK5926G2ZH) has filed an application in FORM GST ARA-01 under Section 97(1) of TGST Act, 2017 read with Rule 104 of CGST/TGST Rules.

The applicant M/s. Kirby Building Systems and Structures India Private Limited, Sangareddy are into the manufacture and supply of pre-engineered buildings and storage racking systems. The applicant averred that they are providing canteen and transportation facilities to its employees at subsidized rates as per the terms of the employment agreement entered between the applicant and the employee. The applicant provided copies of employment agreement in Annexure-3 to the application. At Para 8.2 of the agreement it is enshrined that the “Company will provide transportation and canteen facility at subsidized rates as per the policy from time to time”.

The Questions and Rulings are:

Question: 1. Whether GST is liable to be discharged on the recoveries being made by the applicant from its employees towards the canteen facilities provided to them?

The perquisites provided by the employer, canteen services in the present case, to their employees in terms of the contractual agreement between the employer and his employees as submitted by them, are in lieu of the services provided by them to their employees in relation to employment. Therefore the perquisites provided by the employer to the employee, in terms of contractual agreement, will not be subjected to GST. However, if the employer makes taxable supply of canteen services to employees by charging consideration for the purpose of business, instead of providing them as a perquisite, the same will be subject to payment of GST, at prescribed rates, as per provisions of CGST/TGST Act’2017.

Question: 2. Whether the applicant is eligible to avail input tax credit in respect of the GST paid on inward supplies used for providing canteen facilities?

As per Section 17(5)(b) of CGST/TGST Act’2017 input tax credit in respect of such canteen facilities shall be available, where it is obligatory for an employer to provide the same to its employees under Factories Act, 1948.

Question: 3. Whether GST is liable to be discharged on the recoveries being made by the applicant from its employees towards the transportation facilities provided to them?

The transportation services, if provided as a perquisite by the employer to the employee, in terms of contractual agreement between the employer and employee, will not be subjected to GST. However if the employer makes taxable supply of transportation services to employees by charging consideration for the purpose of business, instead of providing them as a perquisite, the same will be subject to payment of GST, at prescribed rates, as per provisions of CGST/TGST Act’2017.

For Official Ruling Download the PDF Given Below: