19 Apr AAR Gujarat Ruling on GST for Canteen Facilities Provided by Employers
In a recent ruling by the Authority for Advance Rulings (AAR), Gujarat, concerning the applicability of Goods and Services Tax (GST) on canteen facilities provided by employers, significant clarifications have been provided. This ruling, issued in the case of M/s. Suzuki Motors Gujarat Pvt. Ltd., brings clarity on the tax implications of canteen services, particularly in the context of amounts recovered from permanent employees. Let’s delve into the details of this ruling to gain a comprehensive understanding.
Facts of the Case
M/s. Suzuki Motors Gujarat Pvt. Ltd., engaged in the manufacturing of passenger cars and related parts, provides canteen facilities to its employees as mandated by the Factories Act, 1948. The company bears a significant portion of the cost of these facilities, especially for permanent employees and those on deputation from the parent company. The applicant sought an advance ruling on the GST implications of these canteen services, particularly concerning the recovery of amounts from permanent employees.
Issue
The primary issue addressed by the AAR, Gujarat, was whether GST is payable on the amount recovered from permanent employees for the canteen facility provided by the employer.
Held
The AAR, Gujarat, rendered the following key observations and rulings:
- Definition of Supply: The AAR referenced Section 7 of the Central Goods and Services Tax Act, 2017, which defines 'supply' as transactions made for a consideration in the course of business. However, perquisites provided by the employer to the employee, as per the terms of their contract, are not considered within the purview of GST.
- Exemption for Canteen Services: Circular No. 172/04/2022-GST clarified that perquisites provided by the employer to the employee, such as canteen facilities, are exempt from GST.
- Applicability to Permanent Employees: The ruling emphasized that the canteen facility provided to permanent employees falls under the purview of employer-employee relationship and is exempt from GST.
- Input Tax Credit (ITC) Eligibility: The AAR ruled that the applicant is eligible to claim ITC on the amount paid to the supplier of service for providing canteen facilities, specifically pertaining to permanent employees.
- Exclusion of Temporary/Contract Workers: It was further clarified that temporary/contract workers, employees on deputation, and those on business travel do not fall under the employer-employee relationship and hence, are not exempt from GST.
- ITC on Inputs: The ruling specified that the applicant is not eligible to avail ITC on inputs such as equipment and kitchen utensils used for providing canteen facilities.
No Comments