Employee recoveries for welfare costs and notice pay were held outside GST as they were not taxable supplies.

Employee recoveries for subsidised canteen and bus facilities were treated as part-reimbursement of third-party welfare costs, with GST already paid on vendor invoices, and were not regarded as supplies in the course or furtherance of business. On that basis, the recoveries were held not liable to GST, and the exemption question for bus transport did not arise. Notice pay recovered for failure to serve the contractual notice period was characterised as compensation for breach of contract, not consideration for toleration of an act or any independent service. The ruling therefore concludes that these employee recoveries do not constitute taxable supply on the facts presented.

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Issues: (i) Whether recoveries from employees towards subsidized canteen facility are liable to GST; (ii) Whether recoveries from employees towards bus transportation facility are liable to GST and exempt under the exemption notification if otherwise taxable; (iii) Whether notice pay recoveries from employees for not serving the full notice period are liable to GST.

Issue (i): Whether recoveries from employees towards subsidized canteen facility are liable to GST.

Analysis: The canteen facility was provided as a welfare measure and as part of the employment arrangement, but the applicant was not in the business of supplying canteen services. The facility was arranged through third-party vendors, GST was already discharged on the vendor invoices, and the employee recoveries were only part-recovery of the same cost. For a transaction to fall within supply under Section 7 of the Central Goods and Services Tax Act, 2017, it must be in the course or furtherance of business. The arrangement did not advance the applicant's business of manufacturing and marketing pharmaceutical products and was not a supply made by the applicant in the ordinary course of business.

Conclusion: The recoveries towards canteen facility are not liable to GST and the answer is in favour of the assessee.

Issue (ii): Whether recoveries from employees towards bus transportation facility are liable to GST and exempt under the exemption notification if otherwise taxable.

Analysis: The bus transportation facility was likewise a welfare and safety measure, procured from third-party vendors, and the applicant was not engaged in the business of transporting passengers. The recoveries from employees were only partial reimbursement of the vendor cost on which GST had already been paid. The activity was not incidental or ancillary to the applicant's business and was not in the course or furtherance of business, so it did not qualify as supply. In view of that conclusion, the question of exemption did not survive as a substantive tax issue.

Conclusion: The recoveries towards bus transportation facility are not liable to GST and the answer is in favour of the assessee.

Issue (iii): Whether notice pay recoveries from employees for not serving the full notice period are liable to GST.

Analysis: Notice pay recovery arose from the employment contract when an employee left without serving the contractual notice period. The amount was treated as compensation for premature exit and not as consideration for any independent service by the employer. The employer did not tolerate the employee's act in the sense required by clause 5(e) of Schedule II, and the recovery was not a consideration for any supply. Services by an employee to the employer in the course of employment are outside supply under Schedule III, and the recovery was held to be compensation arising from breach of contract rather than a taxable service.

Conclusion: Notice pay recoveries are not liable to GST and the answer is in favour of the assessee.

Final Conclusion: The ruling holds that none of the three employee recoveries constitute taxable supply under GST on the facts presented, so no GST is payable on the impugned recoveries.

Ratio Decidendi: A recovery from employees is not taxable under GST unless it is a supply made in the course or furtherance of business or a consideration for an identifiable service such as toleration of an act; mere reimbursement of welfare facilities or compensation for contractual breach does not amount to supply.

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