Companies will not be required to pay GST on employees’ share of canteen charges collected by them and paid to the service provider. However, they will get input tax credit (ITC) on the on GST charged by the service provider in respect of canteen facility provided to its direct employees working in their factory, as per two rulings by Gujarat Authority for Advance Rulings (GAAR) and one by Andhra Pradesh AAR (APAAR).

Though authority on advance rulings (AAR) are applicable on applicant and jurisdictional tax officer only, still they are being relied upon in similar matter.Also, in many cases, they have become base of policy decision, applicable on all.

Two applications on similar matter – one by AIA Engineering and another by Cadila Pharmaceuticals, were filed with GAAR.

In the matter, before APPAAR, Brandix Apparel India just wanted to know whether GST would be applicable on the amount recovered from employees for canteen facilities provided to them.

GAAR has said that GST is not leviable on the amount representing the employee’s portion of canteen charges recovered/collected by the company and paid to the canteen service provider since it would not be considered as a supply. However, ITC will be available to the company on its share in total amount paid to the canteen service provider.

Similarly, while disposing application by Cadila, GAAR said that the subsidised deduction made by the applicant from the employees who are availing food in the factory/corporate office would not be considered as a ‘supply’. The ITC will be restricted to to the extent of the cost borne by the company for providing canteen services to its direct employees.

APAAR cited provisions of State’s Factory Act which mandates providing canteen services and concluded that GST would not be applicable on employees’ share of canteen charges.