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TN AAR says GST to be levied on workers’ share of canteen fees

Tamil Nadu’s Authority for Advance Ruling (TNAAR) has dominated that worker’s share for canteen companies can be subjected to Items & Companies Tax (GST). That is opposite to earlier rulings by Gujarat AAR (GAAR) within the matter of two pharmaceutical firms.

“The applicant has established canteen services as mandated beneath Part 46 of of the Factories Act, 1948 and provides meals at a nominal price both instantly or by way of third-party vendor. The provision of meals by the applicant is ‘Provide of Service’ by the applicant to their workers as the identical shouldn’t be part of the employment contract and the canteen facility is offered beneath the Factories Act. The nominal price, which is recovered from the wage as deferred fee is ‘consideration’ for the provision and GST is liable to be paid,” TNAAR mentioned whereas disposing the appliance filed by Chennai primarily based Kothari Sugars and Chemaicals Restricted.

The applicant mentioned it has engaged a 3rd get together vendor for canteen facility as mandated by the Factories Act. The corporate bears a part of the fee made to the distributors whereas the remaining is recovered from workers. It doesn’t retain any revenue margin on this exercise of amassing worker’s portion of canteen fees.

After going by way of all of the information and arguments, TNAAR mentioned the restoration of price from the delayed funds don’t alter the actual fact of the service offered and the particular person offering the mentioned provide. The third half has entered into settlement with the applicant for working of the canteen in considered one of models and is paid service fees which is a provide made by the third get together vendor to the applicant. “The provision of the meals by the employer, i.e., the applicant to their workers is composite provide of meals held as ‘Provide of Service’ as per Schedule-II of the GST Act,” AAR mentioned and dominated GST to be paid.

No generalisation

AAR rulings are relevant solely on the applicant and associated tax jurisdiction, although may be referred in comparable matter. Curiously, the applicant talked about the GAAR’s choice within the case of Emcure together with others, however TNAAR made it clear that the advance ruling granted to 1 utility couldn’t be utilized universally . Within the matter of Emcure, GAAR had held that firm not required to pay Items and Companies Tax on workers’ share for canteen companies and free transportation companies. In the same matter of Cadila, GAAR held the identical.

“We’re not inclined to accord this canteen service facility offered by Cadila to its workers as an exercise made within the course or furtherance of enterprise, deeming it a Provide by Cadila to its workers,” GAAR mentioned and dominated no GST to be levied. Within the matter of Emcure, it mentioned that GST is leviable neither on the worker portion of canteen fees, nor on the free bus transportation facility offered to its workers. ITC can be admissible within the case of GST paid on the hiring of a bus (with capability of greater than 13 individuals), however not on GST paid for canteen facility.

Revealed on

July 02, 2022


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