2018 (4) TMI 582 - AAR - GST

Scope of the term supply - whether recovery of food expenses from employees for the canteen service provided by the applicant / company comes under the definition of outward supplies and are taxable under Goods & Service Tax Act? - Held that - From the plane reading of the definition of business , it can be safely concluded that the supply of food by the applicant to its employees would definitely come under clause (b) of Section 2(17) as a transaction incidental or ancillary to the main business - Even though there is no profit as claimed by the applicant on the supply of food to its employees, there is supply as provided in Section 7(1 )(a) of the GST Act, 2017. The applicant would definitely come under the definition of Supplier as provided in sub-section (105) of Section 2 of the GST Act, 2017. The recovery of food expenses from the employees for the canteen services provided by company would come under the definition of outward supply as defined in Section 2(83) of the Act, 2017, and therefore, taxable as a supply of service under GST.

Summary

Issues involved:
Recovery of food expenses from employees for canteen services - Whether it constitutes outward supplies and is taxable under GST Act.

Analysis:
The case involved an application for Advance Ruling by a Private Limited Company engaged in the manufacture and sale of footwear regarding the taxability of recovering food expenses from employees for canteen services provided. The company provided canteen services exclusively for its employees, incurring running expenses and recovering the same without profit. The company argued that the activity did not constitute 'supply' as it was not a business activity but a statutory requirement under the Factories Act, 1948, to provide canteen facilities for employees. The company referred to a previous Service Tax Law exemption for canteen services in factories. The applicant questioned whether the reimbursement of food expenses from employees constituted outward supplies taxable under the GST Act.

The ruling authority examined the definitions of 'business' and 'supply' under the GST Act. It noted that the supply of food to employees fell under the definition of 'business' as a transaction incidental or ancillary to the main business. Schedule II of the GST Act classified the supply of goods or services, including food, as a supply of service. Despite the company not making a profit, the activity still constituted a 'supply' under the GST Act. The authority also considered the definition of 'consideration' under the GST Act, stating that the recovery of food costs from employees constituted consideration as defined. The authority highlighted that the absence of a similar provision under GST laws, unlike the previous Service Tax Law exemption for canteen services, led to the conclusion that the recovery of food expenses for canteen services constituted an outward supply taxable under GST.

In conclusion, the ruling clarified that the recovery of food expenses from employees for canteen services provided by the company constituted an 'outward supply' as defined in the GST Act and was therefore taxable as a supply of service under GST.