Subsidized deduction from employees availing food from factory/corporate office, not supply: No GST, rules Gujarat Authority for Advance Ruling (AAR).
M/s. Zydus Lifesciences Ltdis engaged in manufacture, supply and distribution of various pharmaceutical products. M/s Zydus is having 1200 (approx.) employees in their factory and registered under the provisions of the Factories Act, 1948.
The employees are charged only for the days on which the employee had punched their ID card and an amount at pre-determined percentage shall be deducted from the salary payable to the respective employee. The above deduction is credited to the expense account in which canteen expense is booked while the full amount of the invoice issued by the Canteen Service Provider is booked as expense in M/s Zydus Profit & Loss account without taking the benefit of ITC of the GST paid on the Canteen Provider’s invoice.
The Canteen Service Provider have entered into an agreement that M/s Zydus shall pay full amount to the service provider for the food served during a prescribed period on behalf of the employees and a pre-determined percentage of the amount paid by the M/s Zydus is recovered from the employees (without any profit) and the balance amount is borne by M/s Zydus, is being treated as staff welfare expense towards subsidized food served to the employees.The applicant contended that the amount deducted from the salary of the employees for providing the subsidized canteen facility, cannot be considered as supply under Section 7 of CGST Act.
The Division Bench of the Authority consisting of Milind Kavatkar and Amit Kumar Mishra observed that “The applicant is not liable to pay GST on the amount deducted/ recovered from the employees. Further the applicant is recipient of canteen service to facilitate the employees and Canteen Service Provider raised the Bill of canteen charges inclusive of GST as per the contract. The applicant collects/ recovers the partial amount from the employees and is required to pay the gross amount inclusive of GST to the canteen service by adding residual amount in the employees’ portion and is required to pay gross amount of Bill inclusive GST to the Canteen Service Provider.”
‘Subsidized deduction made by the Applicant from the employees who are availing food in the factory/corporate office would not be considered a supply under the provisions of Section 7 of Central Goods and Service Tax Act, 2017 and Gujarat Goods and Service Tax Act. 2017” the Authority ruled.
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