Employee welfare recoveries under GST: canteen and transport charges taxable, notice pay recoveries treated as non-taxable compensation.

Recoveries from employees for canteen and bus transportation facilities were held taxable under GST because the employer-provided welfare arrangements were treated as supplies made in the course of business and the recovered amounts constituted consideration. The claimed exemption for the bus transportation arrangement failed because the employer was not treated as the contract carriage permit holder and the service was not covered by the exemption relied on. GST was confined to the actual amount recovered from employees, with the employer-funded balance excluded from the taxable value. Notice pay recoveries for failure to serve the notice period were held compensatory and outside GST, as they did not amount to consideration for an independent supply.

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Issues: (i) Whether recoveries made from employees towards canteen facility are taxable under GST; (ii) Whether recoveries made from employees towards bus transportation facility are taxable under GST and, if so, whether the claimed exemption under Notification No. 12/2017-Central Tax (Rate) is available; (iii) Whether GST is payable only on the amount recovered from employees for such facilities; (iv) Whether notice pay recoveries from employees for not serving the notice period are taxable under GST.

Issue (i): Whether recoveries made from employees towards canteen facility are taxable under GST.

Analysis: The canteen facility was treated as part of the employer's business arrangements because it supported the functioning of the enterprise and was provided through an external vendor with onward recovery from employees. The arrangement was not treated as outside the scope of supply merely because the employer's principal business was manufacture and sale of goods. The contractual employment setting and the recovery made from employees were taken into account, along with the view that the activity was connected with the business and not covered by the Schedule III exclusion.

Conclusion: The recovery towards canteen facility is taxable under GST, in favour of Revenue.

Issue (ii): Whether recoveries made from employees towards bus transportation facility are taxable under GST and, if so, whether the claimed exemption under Notification No. 12/2017-Central Tax (Rate) is available.

Analysis: The transportation arrangement was held to be a supply by the employer to employees for consideration, with the employer recovering part of the cost from employees after availing the service from a third-party transporter. The claimed exemption for non-air-conditioned contract carriage was rejected because the employer was not itself the contract carriage permit holder and the activity was treated as renting or passenger transport service rather than exempt contract carriage service. The exemption notification was therefore found inapplicable.

Conclusion: The recovery towards bus transportation facility is taxable under GST and the exemption claim fails, in favour of Revenue.

Issue (iii): Whether GST is payable only on the amount recovered from employees for such facilities.

Analysis: The taxable value was confined to the actual amounts recovered from employees. The balance cost borne by the employer was treated as a perquisite or employer-funded portion not forming part of the taxable recovery from employees for the purposes of this ruling.

Conclusion: GST is payable only on the actual amount recovered from employees, in favour of the assessee on valuation.

Issue (iv): Whether notice pay recoveries from employees for not serving the notice period are taxable under GST.

Analysis: Notice pay recoveries were treated as compensatory in nature and not as consideration for any independent supply or for tolerating an act. The amounts were held to be outside the ambit of GST and not covered by the supply provisions applied in the ruling.

Conclusion: Notice pay recoveries are not taxable under GST, in favour of the assessee.

Final Conclusion: The ruling sustains GST liability on canteen and bus transportation recoveries, rejects the claimed exemption for the transportation arrangement, limits the taxable value to the employee recoveries, and excludes notice pay recoveries from GST.

Ratio Decidendi: Where an employer provides employee welfare facilities as part of the employment arrangement and recovers part of the cost from employees, the recovered amount can constitute taxable consideration for supply if the activity is in the course or furtherance of business; by contrast, notice pay forfeiture or recovery for premature exit is compensatory and not consideration for a taxable supply.

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