The Gujarat bench of the Authority for Advance Rulings (AAR) has held that GST cannot be levied on the amount representing the employee’s portion of canteen charges by the employer.
M/s. Cadila submit that a supply must involve enforceable reciprocal obligations. If something has been used, but there was no agreement for its supply between the relevant parties, any payment subsequently received by the aggrieved party is not consideration for supply. The receipt of payment is not premised on the enforcement of reciprocal obligations between parties and cannot be linked to a supply for the purpose of levying GST. Hence, the deduction in employees’ salary made by M/s. Cadila would constitute a mere transaction in money between the M/s. Cadila and its employees.
The question before the AAR bench was “whether the subsidized deduction made by the Applicant from the employees who are availing food in the factory/corporate office would be considered as a supply by the Applicant under the provisions of Section 7 of Central Goods and Service Tax Act, 2017 and Gujarat Goods and Service Tax Act, 2017.”
A bench of State Member Mr. Atul Mehta and Central Member Mr. Arun Richard found that M/s Cadila 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 M/s. Cadila whereas the remaining part is borne by its employees. The said employees’ portion canteen charges is collected by M/s. Cadila and paid to the Canteen Service Provider. M/s. Cadila submitted that it does not retain with itself any profit margin in this activity of collecting employees’ portion of canteen charges. We are not inclined to accord this canteen service facility provided by M/s Cadila to its employees to be an activity made in the course or furtherance of business to deem it a Supply by M/s Cadila to its employees,” the bench said.
Answering the question in negative, the AAR held that GST, at the hands of the M/s Cadila, is not leviable on the amount representing the employees portion of canteen charges, which is collected by M/s Cadila and paid to the Canteen service provider.
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