No GST on nominal sum companies deduct for canteen – Times of India
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MUMBAI: In a ruling given to Tata Motors, the Gujarat bench of the Authority of Advance Rulings (AAR) has held that no goods and services tax (GST) will be levied on the nominal amount recovered from employees for canteen facilities, which is passed on by the company to the third-party caterer.
To cater to the needs of employees, corporate entities typically arrange for canteen services, where the meals are served by a third-party caterer. A part of the amount (albeit, a very nominal sum) is recovered from the employees and issues relating to levy of GST often arise.
Tata Motors explained in its submission that it was recovering this nominal amount on a monthly basis, by way of a salary deduction, to ensure that the canteen is used only by its employees.
It added that a press release issued by the Central Board of Indirect Taxes & Customs (CBIC) had clarified that supply by the employer to the employee in terms of contractual agreements of employment (part of cost to company) is not subject to GST.
As it was not in the business of providing canteen services, recovery of this nominal amount should not constitute a taxable ‘supply’.
While factories and offices providing essential services are humming with activity, other workplaces are also gearing up to open their doors to employees, even if under a hybrid model. No doubt, office canteens will again buzz with activity — perhaps with social distancing norms. Thus, this ruling will be of great help to corporate entities facing a similar situation.
While advance rulings do not set a judicial precedent, they have persuasive value in assessments. This AAR ruling is consistent with the stand taken by the Maharashtra AAR in another case.
On the flip side, as regards the query on whether input tax credit is available to the company on GST charged by the third-party caterer, the AAR held that it is blocked credit and is inadmissible.
To cater to the needs of employees, corporate entities typically arrange for canteen services, where the meals are served by a third-party caterer. A part of the amount (albeit, a very nominal sum) is recovered from the employees and issues relating to levy of GST often arise.
Tata Motors explained in its submission that it was recovering this nominal amount on a monthly basis, by way of a salary deduction, to ensure that the canteen is used only by its employees.
It added that a press release issued by the Central Board of Indirect Taxes & Customs (CBIC) had clarified that supply by the employer to the employee in terms of contractual agreements of employment (part of cost to company) is not subject to GST.
As it was not in the business of providing canteen services, recovery of this nominal amount should not constitute a taxable ‘supply’.
While factories and offices providing essential services are humming with activity, other workplaces are also gearing up to open their doors to employees, even if under a hybrid model. No doubt, office canteens will again buzz with activity — perhaps with social distancing norms. Thus, this ruling will be of great help to corporate entities facing a similar situation.
While advance rulings do not set a judicial precedent, they have persuasive value in assessments. This AAR ruling is consistent with the stand taken by the Maharashtra AAR in another case.
On the flip side, as regards the query on whether input tax credit is available to the company on GST charged by the third-party caterer, the AAR held that it is blocked credit and is inadmissible.
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