Advance Ruling Kerala AAR:- Whether recovery of food expenses from employees for the canteen provided by company comes under the definition of outward supplies and are taxable under GST Act ORDER No.CT/531118-C3 DATED 26/03/2018 Caltech Polymers Pvt Ltd

Financial Year: 2017

KERALA AAR

Question:-

 

M/s Caltech Polymers Pvt. Ltd., Malappuram (hereinafter called the applicant or the Company) has preferred an application for Advance Ruling on whether recovery of food expenses from employees for the canteen service provided by the applicant I company comes under the definition of outward supplies and are taxable under Goods& Service Tax Act.

 

Answer:-

ORDER No.CT/531118-C3 DATED 26/03/2018

 

 

(1) The applicant is a Private Limited Company engaged in the manufacture and sale of footwear. It is submitted that they are providing canteen services exclusively for their employees. They are incurring the canteen running expenses and are recovering the same from its employees without any profit margin.

 

(2) It is according to the provisions of the Factories Act, 1948. As per section 46 of the said Act, any factory employing more than 250 workers is required to provide canteen facility to its employees

 

(3) The company does not make any profit while recovering the cost of the food items, from the employees. Only the actual cost incurred for the food items is recovered from the employees.

 

(4) The company is of the opinion that this activity does not fall within the scope of 'supply', as the same is not in the course or furtherance of its business. The  Company is only facilitating the supply of food to the employees, which is a statutory requirement, and is recovering only the actual expenditure incurred in connection with the food supply, without making any profit.

 

Judgement

 

Schedule II to the CGST Act describes the activities to be treated as supply of Goods or supply of services. As per clause 6 of the Schedule, the following composite supply is declared as supply of service.

 

"supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply of service is-for cash, deferred payment or other valuable consideration."

 

Even though there is no profit as claimed by the applicant on the supply of food

to its employees, there is "supply" as provided in Section 7(1)(a) of the CGST Act, 2017.

The applicant would definitely come under the definition of "Supplier"

 

Since the applicant recovers the cost of food from its employees, there is consideration as defined in Section 2(31) of the GST Act, 2017. It is hereby clarified that recovery of food expenses from the employees for the canteen services provided by company would come under the definition of 'outward supply'

 

Proviso to Section 17(5)(b)

Provided that Input Tax Credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force.

 

Thanks

CA Rahul Gupta