2021 (8) TMI 836 - AAR - GST

Levy of GST - amount collected from the employees towards canteen charges - HELD THAT - The applicant has arranged a canteen for its employees, which is run by a third party Canteen Service Provider. As per their arrangement, part of the Canteen charges is borne by the applicant whereas the remaining part is borne by its employees. The said employees portion canteen charges is collected by the applicant and paid to the Canteen Service Provider. The applicant submitted that it does not retain with itself any profit margin in this activity of collecting employees portion of canteen charges. This activity carried out by applicant is without consideration. GST, at the hands on the applicant, is not leviable on the amount representing the employees portion of canteen charges, which is collected by the applicant and paid to the Canteen service provider.

Summary

Issues: Whether GST is applicable on the amount collected from employees towards canteen charges.

Analysis:
The applicant sought an advance ruling on whether they are required to charge GST on the amount collected from employees towards canteen charges. The applicant provided details stating that the canteen facility is provided to employees as mandated by Section 46 of the Factories Act, 1948. The company acts as a mediator between the employees and the canteen service provider, collecting amounts from employees and paying them to the contractor. They argued that this activity does not fall within the scope of supply as it is not in furtherance of their business and is done without making any profit. The applicant also highlighted that the canteen service provider charges GST on the supply of food, but due to restrictions under Section 17(5) of the CGST Act, 2017, they are not entitled to avail input tax credit. Therefore, they contended that the canteen service provided by the company should not be considered a service, and hence, no GST should be payable.

During the personal hearing, the applicant reiterated their stance, emphasizing that providing canteen facilities is mandatory under the Factories Act, 1948, for companies with more than 250 employees. They explained their arrangement with the canteen contractor, where a fixed amount per plate is agreed upon, and the company recovers a nominal amount from employees to cover part of the expenses. An illustration was provided to clarify the payment process between the company, employees, and the canteen contractor.

Upon careful consideration of the submissions, the Authority for Advance Ruling found that the applicant arranges a canteen for its employees, with part of the charges borne by the company and the rest by the employees. The portion of charges collected from employees is then paid to the canteen service provider, with the applicant not retaining any profit margin from this collection. It was noted that this activity is carried out without consideration. Consequently, the ruling was passed stating that GST is not leviable on the amount representing the employees' portion of canteen charges, which is collected by the applicant and paid to the canteen service provider.