Employee canteen recoveries are not taxable supply when linked to employment terms and statutory canteen obligations.

Subsidised canteen recoveries from permanent employees were treated as part of the employer-employee arrangement and not as an independent taxable supply. The AAR noted that the canteen was provided under the employment arrangement and the statutory canteen obligation under the Factories Act, while the amount recovered represented only partial cost recovery with no profit element. Relying on Schedule III to the CGST Act and the CBIC clarification on contractual perquisites, it held that services by an employee to an employer in the course of employment are outside GST. GST was therefore not payable on the employee recovery for the canteen facility.

---

---

Issues: Whether the subsidized amount recovered from employees for canteen facility provided in the factory/corporate office constitutes a supply under the GST law, and whether GST is payable on such recovery.

Analysis: The canteen facility was provided to permanent employees in terms of the employment arrangement and statutory canteen obligation under the Factories Act, 1948. The amount recovered from employees was only a partial recovery of the canteen cost, with no profit element retained by the applicant. The ruling relied on Schedule III to the Central Goods and Services Tax Act, 2017, which excludes services by an employee to the employer in the course of employment, together with the CBIC clarification that perquisites provided under a contractual employment arrangement are not subjected to GST. On that basis, the facility and the recovery linked to it were treated as part of the employer-employee arrangement and not as an independent taxable supply.

Conclusion: The subsidized deduction recovered from employees for availing canteen facility does not constitute a supply under Section 7 of the Central Goods and Services Tax Act, 2017 and Gujarat Goods and Services Tax Act, 2017, and GST is not payable on that recovery.

---