The Appellate Authority for Advance Rulings (AAAR) has upheld the ruling of the AAR that 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 Goods and Services Tax Act, 2017 and hence are taxable under the Goods and Services Tax (GST) laws.
The authority ruled that such activity of providing food would amount to ‘supply’ for imposing the tax.
M/s. Caltech Polymers Pvt. Ltd is a manufacturer and seller of footwear. As the factory employs more than 250 employees, the company was statutorily obliged to provide canteen services to its employees as per Section 46 of the Factory Act,1948. A space for the canteen was provided by the company inside the factory premises and the expenses incurred to run the services were recovered from the employees as a deduction from their monthly salary in proportion to the food they consumed.
Before the authority, the applicant submitted that the service provided to the employee was not being carried out as a business activity and it was according to the provisions in the Factories Act, 1948.
On appeal, the authority noted that Section 7, read with section 2(83) of the Central Goods and Service Tax Act, 2017 and section 7 of the Kerala Goods and Service Tax Act, 2017.
“The food provided to the employees was already taxed under the erstwhile Value Added Tax and thereby the Hon’ble High Court held that the same could not be subjected to Service Tax. Hence the Hon’ble Court had decided upon a matter where the issue of double taxation was a relevant fact. As there is no possibility of such double taxation in the GST regime, it is evident that the facts of the Bhimas Hotels case cannot be considered to be in pari-materia with the facts of this case,” the authority said.
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