2026-VIL-70-AAR
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SGST Advance Ruling Authority

GST – Maharashtra AAR - Taxability of recovery of canteen services made from employees - Applicant is a manufacturing company that provides canteen facility to its employees as per the Factories Act, 1948. The applicant recovers a portion of the canteen expenses from the employees' salary - Whether the recoveries made from employees for the canteen facility are taxable under GST - HELD - The canteen facility provided to employees is in connection with or incidental to the principal business activity of the applicant, and hence falls within the definition of "business" under Section 2(17) of the CGST Act, 2017 - the criteria of ‘business’, ‘consideration’ are met in the transaction of supply of canteen services by Applicant to the employees. Thus, there is supply of canteen services from the Applicant to the employees under Section 7(1) of CGST Act, 2017 - The value of the outward supply of canteen service can be considered as having two parts. First part is the amount of recovery that is made from the employees, and second part is balance value of the services provided by the employer as perquisite which is in the lieu of the services provided by employees to the employer. In respect of the canteen services provided by the applicant to its employees, the exemption provided in Entry 1 of Schedule III to the CGST Act, 2017 applies only to the concession part extended to the employees and not to the value charged to the employees - The recoveries made from the employees are liable to levy of tax, except for the value of the canteen services provided as a "perquisite" to the employees in lieu of their services to the employer, which is excluded from the scope of supply under Schedule III of the CGST Act - GST is payable on the recoveries made from the employees' salary towards the canteen facility, except for the value of the canteen services provided as a perquisite to the employees – Ordered accordingly - Notice Pay Recoveries - The applicant recovers notice pay from employees who leave the employment without serving the full notice period - Whether the notice pay recoveries are taxable under GST - HELD - The notice pay recoveries are not for tolerating the act of premature quitting of employment, but as penalties to discourage non-serious employees from taking up employment. The employee does not receive anything in return from the employer for such payments. Therefore, the notice pay recoveries are not taxable as consideration for any service under the GST law. The notice pay recovery made from the employees are not liable to GST.
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