GST not payable on amount recovered from permanent employees for canteen facility provided by employer

[CA Bimal Jain]

The AAR, Gujarat in the case of IN RE: M/S. SUZUKI MOTOR GUJARAT PVT LTD. - 2024 (2) TMI 848 - AUTHORITY FOR ADVANCE RULING, GUJARAT ruled that, GST is not payable on amount recovered for canteen facility provided to employer from permanent employees only. It was further held that, the Applicant is eligible to claim ITC on the amount paid to the supplier of service for providing canteen facilities to the extent of cost borne by the Applicant in relation to permanent employees only.

Facts:

M/s. Suzuki Motors Gujarat Private Limited (“the Applicant”) is engaged in the business of manufacturing passenger cars and related parts. The Applicant in compliance with the provisions of the Factories Act, 1948 is providing canteen facilities to its employees at subsidized rates within the factory premises for which the Applicant entered into a contract with the Canteen Service Provider. The Applicant provides canteen facilities to its employees, employees of the parent company such as Suzuki Motors Corporation on deputation, Maruti Suzuki India Ltd. on business travel and temporary workers including team lease employees who are on third-party roll working within the factory premises.  The Applicant, in case of the permanent employees and employees of parent company bears 70 percent of the cost whereas in the case of the temporary workers, the Applicant bears 70 percent of the cost.

The Applicant has filed an application for advance ruling on whether the canteen services provided by the Applicant would be considered as supply under GST and whether the Applicant is eligible to claim ITC on the amount of GST paid to canteen service provider and inputs such as equipment and kitchen facilities utilized for providing kitchen facilities.

Issue:

Whether GST payable on amount recovered from permanent employees for canteen facility provided to employer?

Held:

The AAR, Gujarat in the case of IN RE: M/S. SUZUKI MOTOR GUJARAT PVT LTD. - 2024 (2) TMI 848 - AUTHORITY FOR ADVANCE RULING, GUJARAT held as under:

• Observed that, Section 7 of the Central Goods and Services Tax Act, 2017, supply means all forms of 'supply' of goods/services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business. The exceptions are Schedule I, which includes the activities made or agreed to be made without consideration, and Schedule III, which includes activities that would be treated neither as a supply of goods or services.
• Noted that, as per Circular No. 172/04/2022-GST dated July 06, 2022, it was clarified that, perquisites provided by the 'employer' to the 'employee' as per the terms of the contract between the employer and the employer would not fall within the purview of GST.
• Further noted that, as per sub-clause (i) of clause (b) of sub-section (5) of Section 17 of the CGST Act read with Notification No. 13/2018-CT (Rate) dated July 26, 2018, the prescribed GST rate is without ITC on supply of food or any other article for human consumption or drink at canteen, mess etc.
• Opined that, there is no dispute regarding the fact the canteen facility provided in compliance with requirements mandated under the Factories
• Further opined that, the temporary/contract workers, employees on deputation and employees on business travel would not fall within the purview of employer-employee relationship and therefore would not be covered under Entry I of Schedule II of the CGST Act. Also, it is further stated that, the supply of food to the Applicant to aforesaid employees would fall within the ambit of clause (b) of Section 2(17) of the CGST Act.
• Relying upon the ruling of Gujarat Appellate Authority for Advance Ruling in the case of IN RE: M/S TATA MOTORS LIMITED  [2022 (12) TMI 1363 - APPELLATE AUTHORITY FOR ADVANCE RULING, GUJARAT] further opined that, ITC would be available to the Applicant pertaining to tax paid for canteen services to the extent of cost borne by the Applicant. 
• Ruled that, the Applicant is not liable to pay GST on the amount recovered from permanent employees towards the canteen facilities provided by the Applicant and is eligible to claim ITC on the amount paid to the supplier of service for providing canteen facilities to the extent of amount paid relating to permanent employees.
• Further Ruled that, the Applicant is liable to pay GST on the amount recovered from temporary/contract workers, employees on deputation and employees on business travel towards the canteen facilities provided by the Applicant and is not eligible to claim ITC on the amount paid to the supplier of service for providing canteen facilities to the extent of amount paid relating to aforesaid employees.
• Further ruled that, the Applicant is not eligible to avail ITC on inputs such equipment and kitchen utensils.

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