AAR rejects advance ruling on GST for subsidized employee canteen services citing applicant as service receiver not supplier

AAR Rajasthan rejected an advance ruling application regarding GST on subsidized canteen services provided to employees through third-party contractors. The authority held that the applicant was not a supplier but a service receiver, making the matter outside AAR's scope. Additionally, since the transactions were already ongoing with GST being paid, rather than proposed future transactions, the application was not maintainable under Section 95 and 97 of CGST Act 2017.

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Issues Involved:
1. Whether providing food to employees at subsidized price falls outside the scope of "supply".
2. Whether the subsidized deduction from employees' salaries can be considered as consideration for "supply of service".
3. Whether GST is applicable on the amount deducted from employees' salaries.
4. Whether the applicant is eligible to take input tax credit (ITC) on GST charged by the third-party contractor for canteen services.

Summary:

Issue 1: Scope of "Supply"
- Applicant's Argument: The applicant contends that providing food at subsidized prices to employees does not constitute a "supply" under GST, as it falls under Entry 1, Schedule III of the CGST Act, which excludes services by an employee to the employer in the course of employment.
- Authority's Findings: The authority finds that the applicant is providing canteen services through a third-party contractor and is recovering subsidized costs from employees. This activity does not fall outside the scope of "supply" as per Section 7 of the CGST Act.

Issue 2: Consideration for "Supply of Service"
- Applicant's Argument: The applicant argues that the subsidized deductions from employees' salaries are not in the nature of consideration for any supply.
- Authority's Findings: The authority concludes that the subsidized deductions made from employees' salaries for canteen services are considered as consideration for the supply of services by the applicant to its employees, in furtherance of business.

Issue 3: Applicability of GST
- Applicant's Argument: The applicant believes that no GST is payable on the deductions made from employees' salaries for canteen services.
- Authority's Findings: The authority rules that GST is applicable on both the amount recovered from employees and the amount paid by the applicant to the canteen service provider.

Issue 4: Eligibility for Input Tax Credit (ITC)
- Applicant's Argument: The applicant asserts that it is eligible to take ITC on the GST charged by the third-party contractor for canteen services, as it falls under the proviso to Section 17(5)(b) of the CGST Act.
- Authority's Findings: The authority determines that ITC is not admissible on the GST paid on canteen services as it is barred under Section 17(5)(b)(i) of the CGST Act.

Conclusion:
The Authority for Advance Ruling (AAR) in Rajasthan ruled that the application for advance ruling is not maintainable as the transactions in question were already being undertaken and GST was already being paid. Therefore, the case does not fall under the purview of Advance Ruling as defined under Section 95 of the CGST Act, 2017. The application is rejected under the provisions of the GST Act, 2017.

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