Employees' Canteen Charges Collected by Company Not Subject to GST When Acting as Payment Conduit

The HC ruled that GST is not leviable on employees' portion of canteen charges collected by the company and paid to canteen service providers at both factory and head office locations. The company merely acted as a conduit without retaining any profit from this arrangement. Since GST was deemed not applicable on these transactions, the questions regarding input tax credit availability and restrictions were considered moot. The court determined that the company's arrangement with canteen service providers did not constitute a taxable service as the company was only facilitating payments without adding a profit margin.

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Issues:
1. Applicability of GST on the amount representing the employees' portion of canteen charges collected by the company and paid to the Canteen service provider at the factory.
2. Applicability of GST on the amount representing the employees' portion of canteen charges collected by the company and paid to the Canteen service provider at the Head Office (HO).
3. Availability of input tax credit (ITC) on the service provider's charges for the canteen facility provided to employees.
4. Restriction of ITC to the extent of the cost borne by the company.

Analysis:

Issue 1 & 2 - Applicability of GST on canteen charges:
The company, referred to as Astral, provides a canteen facility for its workers and staff through a Canteen Service Provider. Astral collects a portion of the food price from employees to pay the service provider. The company does not retain any profit from this activity. The Advance Ruling Authority ruled that GST is not leviable on the employees' portion of canteen charges collected by Astral and paid to the service provider at both the factory and the Head Office.

Issue 3 & 4 - Availability and restriction of ITC:
Since the ruling states that GST is not applicable on the employees' portion of canteen charges, the question of input tax credit (ITC) availability and restriction does not apply. Therefore, the Authority ruled that ITC is not applicable in this case due to the non-leviability of GST on the employees' portion of canteen charges.

The Revenue's submission highlighted that the canteen facility is an ongoing activity provided to employees using the company's premises and capital goods. The Authority considered all submissions and found that Astral's arrangement with the Canteen Service Provider does not involve any profit margin for the company. Consequently, the ruling was passed in favor of Astral, stating that GST is not applicable on the portion of canteen charges collected from employees and paid to the service provider.

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