SGST Advance Ruling Authority

GST – Gujarat AAR - GST on canteen facility provided by third-party canteen service provider – Whether the subsidized deduction made by the applicant from employees towards canteen facility in the factory amounts to ‘supply’ under the provisions of Section 7 of the CGST Act, 2017 – HELD - in terms of Circular No. 172/04/2022-GST, perquisites provided by the ‘employer’ to the ‘employee’, in terms of contractual agreement entered into between the employer and the employee, will not be subjected to GST when the same are provided in terms of the contract between the employer and employee – accordingly, the subsidized deduction made by the applicant from the employees who are availing food in the factory would not be considered as a ‘supply’ under the provisions of GST Act – Applicant is not liable to pay GST on the amount representing the employees portion of canteen charges, which is collected by the applicant and paid to the third-party canteen service provider – Ordered accordingly - GST on the amount representing the contractual worker portion of canteen charges – HELD - in respect of canteen service provided to contractual workers, the applicant has established canteen facilities as mandated under the Factories Act, 1948 and supplies food at a subsidized cost through third-party canteen service provider. The supply of food by the applicant is ‘supply of service’ by the applicant to their contractual worker and the cost recovered from the salary of contractual worker, as deferred payment is ‘consideration’ for the supply - Recovery of amount from contractual worker on account of third party canteen services provided by the applicant would fall within the ambit of the definition of ‘outward supply’ as per section 2(83) of the CGST Act and therefore, is liable to tax as a supply under GST - Eligibility to Input Tax Credit – HELD – as far as provision of canteen service for full time/direct employees working on permanent basis at the factory is concerned, applicant is eligible to claim ITC in respect of food and beverages as canteen facility is obligatorily to be provided under the Factories Act and Rules - It is further held that the ITC on GST charged by the canteen service provider will be restricted to the extent of cost borne by the appellant only - ITC on canteen charges on the food supplied to contractual worker – HELD – the applicant company and contractual workers, do not fall within the ambit of employer-employee relationship and it is not obligatory on the applicant to provide canteen facility to the contractual worker as per provisions of Contract Labour (Regulation and Abolition) Act, 1970 - Section 17(5) of the CGST Act, 2017 allows ITC on food, beverages & outdoor catering only in case it is obligatory under any law for the time being in force. Thus, applicant is not eligible of Input Tax Credit on the food supplied by third-party canteen service provider to contractual worker - applicant is not eligible to the ITC on food supplied to the contractual worker under Section 17(5)(b) of CGST Act, 2017.

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