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SGST Advance Ruling Authority

GST – Kerala AAR - GST Liability on Subsidized Canteen Charges - Whether GST is chargeable on amounts recovered at subsidized rates from employees on rolls and contract employees for providing food through company-operated canteen as mandated under the Factories Act, 1948 – HELD - The Section 7 of the CGST Act, 2017 defines "supply" to include activities conducted in the course or furtherance of business for consideration, but the applicant's canteen operation does not qualify as business activity but rather as welfare measure arising from statutory compliance – The CBIC Circular No. 172/04/2022-GST clarifies that perquisites contractually embedded in employment terms, whether expressly or through statutory obligations, do not constitute taxable supply - Regarding treatment of contract employees, the Section 46 of Factories Act mandates canteen facilities for all "workers", which includes persons employed directly or through contractors, making no distinction between regular and contract employees. Excluding contract employees from GST exemption would create artificial classification contrary to Factories Act spirit and judicial interpretation of "worker" - Once canteen facilities are extended as part of legal obligations applicable to all “workers”, whether regular or contractual, the perquisite assumes the character of employment-related welfare and cannot be taxed, even if a partial cost recovery is made - GST is not chargeable on amounts recovered at subsidized rates from employees on rolls and contract employees for providing food through company canteen as mandated under Factories Act, 1948, as such provision constitutes employment-related perquisite excluded from definition of taxable supply – Ordered accordingly - Input Tax Credit on Canteen Supplies - Whether Input Tax Credit can be claimed by the company on inward supplies used in canteen for supplying food to employees when canteen is operated under statutory mandate with partial cost recovery – HELD - The Proviso to Section 17(5)(b)(i) of the CGST Act, 2017 allows Input Tax Credit where the provision of food or beverages is a statutory obligation, and it does not make ITC eligibility conditional upon the manner in which consideration, if any, is received from employees. Whether the employer bears the entire cost, or recovers it partially or fully from employees, has no bearing on ITC entitlement - The applicant is eligible to claim full Input Tax Credit on all inward supplies used in the canteen as provision of canteen facilities is obligatory under Factories Act, 1948, subject to condition that GST burden has not been passed on to employees.
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