2022 (3) TMI 1147 - AAR - GST

Levy of GST - amount representing the employees portion of canteen charges which is collected by the applicant and paid to the Canteen service provider by company at Factory - amount representing the employee s portion of canteen charges which is collected by the applicant and paid to the Canteen service provider by company at HO - input tax credit (ITC) available charged by service provider on canteen facility provided to employees working in factory/HO - restriction of ITC to the extent of cost borne by the company. HELD THAT - Astral has arranged a canteen for its employees which is run by a Canteen Service Provider. As per their arrangement part of the Canteen charges is borne by Astral whereas the remaining part is borne by its employees. The said employees portion canteen charges is collected by Astral and paid to the Canteen Service Provider. Astral submitted that it does not retain with itself any profit margin in this activity. GST at the hands of Astral is not leviable on the amount representing the employees portion of canteen charges which is collected by Astral and paid to the Canteen service provider.

Summary

Issues:
1. Applicability of GST on the amount representing the employees' portion of canteen charges collected by the company and paid to the Canteen service provider at the factory.
2. Applicability of GST on the amount representing the employees' portion of canteen charges collected by the company and paid to the Canteen service provider at the Head Office (HO).
3. Availability of input tax credit (ITC) on the service provider's charges for the canteen facility provided to employees.
4. Restriction of ITC to the extent of the cost borne by the company.

Analysis:

Issue 1 & 2 - Applicability of GST on canteen charges:
The company, referred to as Astral, provides a canteen facility for its workers and staff through a Canteen Service Provider. Astral collects a portion of the food price from employees to pay the service provider. The company does not retain any profit from this activity. The Advance Ruling Authority ruled that GST is not leviable on the employees' portion of canteen charges collected by Astral and paid to the service provider at both the factory and the Head Office.

Issue 3 & 4 - Availability and restriction of ITC:
Since the ruling states that GST is not applicable on the employees' portion of canteen charges, the question of input tax credit (ITC) availability and restriction does not apply. Therefore, the Authority ruled that ITC is not applicable in this case due to the non-leviability of GST on the employees' portion of canteen charges.

The Revenue's submission highlighted that the canteen facility is an ongoing activity provided to employees using the company's premises and capital goods. The Authority considered all submissions and found that Astral's arrangement with the Canteen Service Provider does not involve any profit margin for the company. Consequently, the ruling was passed in favor of Astral, stating that GST is not applicable on the portion of canteen charges collected from employees and paid to the service provider.