2018 (10) TMI 1313 - AAAR - GST

Levy of GST - providing canteen services exclusively for their employees - Supply of services or not - scope of supply and consideration - Held that - The appellant company has admitted that they are serving food to the employees for cash, though there is no profit involved in the transaction. In spite of the absence of any profit, the activity of supplying food and charging price for the same from the employees would surely come within the definition of supply as provided in Section 7(1)(a) of the GST Act, 2017. Consequently, the appellant would definitely come under the definition of supplier as provided in subsection (105) of Section 2 of the GST Act, 2017. Moreover, since the appellant recovers the cost of food items from their employees, there is consideration as defined in Section 2(31) of the GST Act, 2017. Ruling - The supply of food items to the employees for consideration in the canteen run by the appellant company would come under the definition of 'supply' and would be taxable under GST.

Summary

Issues:
Recovery of food expenses from employees for canteen services - Whether taxable under GST Act.

Analysis:

Issue 1: Recovery of Food Expenses - Definition of Outward Supplies under GST

The case involved a company providing canteen services exclusively for its employees and recovering expenses without profit margin. The company argued that the activity did not constitute a supply as it was not in the course of business but a statutory requirement under the Factories Act, 1948. The Advance Ruling Authority determined that despite no profit, the activity fell under the definition of 'supply' as per Section 7(1)(a) of the GST Act, making the company a 'supplier' under Section 2 of the Act.

Issue 2: Consideration and Applicability of GST

The appellant contended that as per Schedule III, services by employees to employers are not considered supplies under GST. They also cited a press release clarifying the non-applicability of reverse charge mechanism in certain transactions. However, the Appellate Authority upheld the ruling that serving food to employees for cash, even without profit, constituted a supply under Section 7(1)(a) of the GST Act, and recovery of food expenses from employees qualified as 'consideration' under Section 2(31).

Issue 3: Comparison with Previous Tax Regime

The appellant referenced a High Court judgment regarding taxation of food provided to workers under the previous tax regime. The Appellate Authority distinguished the case, emphasizing that the current GST regime did not pose the risk of double taxation, thus affirming the decision that the supply of food items to employees in the company's canteen was taxable under GST.

In conclusion, the Appellate Authority dismissed the appeal, affirming that the supply of food items to employees in the company's canteen constituted a taxable supply under the GST Act, despite the absence of profit margin, based on the definitions of 'supply' and 'consideration' under the Act.