Canteen recoveries under GST: employee deductions fall outside supply, but contractual worker recoveries remain taxable consideration.

Employee canteen recoveries were treated as part of the employment arrangement and a statutory welfare obligation, so the subsidized amount recovered from employees was not an independent supply under GST. The Authority relied on Schedule III and the GST circular on employee benefits. By contrast, recoveries from contractual workers were held taxable because they were not employees of the applicant: control, supervision, wages, statutory liabilities, and indemnity remained with the contractor. The amount recovered from the contractor was treated as consideration for an outward supply in the course of business, and GST was payable on that recovery.

---

---

Issues: (i) Whether the subsidized deduction made by the applicant from employees towards the canteen facility provided through a canteen service provider is a supply under section 7 of the GST law. (ii) Whether the subsidized deduction made by the applicant from contractual workers towards the canteen facility provided through a canteen service provider is a supply under section 7 of the GST law and, if so, the value on which GST is payable.

Issue (i): Whether the subsidized deduction made by the applicant from employees towards the canteen facility provided through a canteen service provider is a supply under section 7 of the GST law.

Analysis: The canteen facility for employees was treated as part of the employment arrangement and as a statutory welfare obligation connected with the factory operations. The reasoning proceeded on the basis that the amount recovered from employees represented a perquisite in the course of employment and did not constitute an independent supply by the applicant. The Authority relied upon the treatment of employee benefits under Schedule III and the clarification in Circular No. 172/04/2022-GST dated 06.07.2022.

Conclusion: The subsidized deduction made from employees towards canteen facility is not a supply by the applicant.

Issue (ii): Whether the subsidized deduction made by the applicant from contractual workers towards the canteen facility provided through a canteen service provider is a supply under section 7 of the GST law and, if so, the value on which GST is payable.

Analysis: The contractual workers were held not to be employees of the applicant because the agreement placed control, supervision, disciplinary responsibility, wages, statutory liabilities, and indemnity obligations on the contractor. On that footing, the canteen recovery from contractual workers was treated as a taxable outward supply made by the applicant in the course of business, with the amount recovered from the contractor constituting consideration. The Authority followed its earlier ruling in the Troikaa Pharmaceuticals matter and distinguished the relied-upon employee-canteen authorities on the absence of employer-employee relationship here.

Conclusion: The subsidized deduction made from contractual workers towards canteen facility is a supply by the applicant, and GST is payable on the amount recovered from the workers' contractor.

Final Conclusion: The ruling grants relief to the applicant only in relation to employee recoveries, but upholds taxability for recoveries attributable to contractual workers.

Ratio Decidendi: Recoveries for canteen facilities from employees are not taxable where they form part of the employment relationship, but recoveries from contractual workers are taxable when the workers remain under the contractor's control and the recovered amount constitutes consideration for a supply in the course of business.

---