Canteen services to employees treated as business supply; recovered amounts taxable while unrecovered concessions are perquisites not subject to GST.

The Authority addressed whether employer provided canteen services amount to a taxable supply. It held that provision of canteen services by the employer (even via a third party service provider) falls within "in the course or furtherance of business" and thus constitutes supply. Free or concessional provision qualifies as a perquisite; where no amount is recovered the entire value is treated as perquisite and not taxable (deemed to fall within Schedule III corollary). Where the employer recovers any amount from employees, the recovered portion is consideration for supply and liable to GST while the unrecovered concession remains a non taxable perquisite.

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Issues: (i) Whether GST is payable on canteen facility provided by the applicant to its employees through a third-party canteen services provider; (ii) If GST is payable, whether GST is applicable when the applicant does not recover any amount from employees for the canteen facility; (iii) If GST is payable, whether GST is applicable when the applicant recovers part or whole of the cost charged by the canteen service provider from the employees.

Issue (i): Whether the canteen facility provided by the applicant to its employees through a third-party vendor amounts to a supply of services under the GST Act.

Analysis: The Authority analysed the inclusive definitions of 'business' and 'supply' under Section 2(17) and Section 7(1) of the Central Goods and Services Tax Act, 2017, the treatment of activities incidental or ancillary to the principal business, Schedule I (deemed supplies) and Schedule III (non-supplies), and relevant CBIC guidance. It identified two distinct transactions: (a) supply of canteen services by the third-party vendor to the applicant and (b) supply of canteen services by the applicant to its employees where the applicant pays the vendor and provides/arranges the service for employees. The Authority treated provision of canteen services by the applicant to employees as an activity connected with or incidental/ancillary to its principal business and therefore falling within the definition of 'business' and 'supply' under the GST Act.

Conclusion: The supply of canteen services by the applicant to its employees amounts to a supply of services under the GST Act and GST is payable on such services. (In favour of Revenue)

Issue (ii): Whether GST is applicable if the applicant does not recover any amount from employees for providing the canteen facility.

Analysis: The Authority examined Schedule III and CBIC Circular No. 172/04/2022-GST clarifying that perquisites provided by an employer to an employee under the contractual employment relationship are in lieu of services rendered by the employee and are not to be treated as supply. It held that where no amount is recovered from employees, the entire value of the canteen service constitutes a perquisite provided by the employer to the employee and qualifies for the non-supply treatment by virtue of Schedule III as interpreted with the CBIC circular.

Conclusion: If no amount is recovered from employees, GST is not applicable on the canteen services as the cost is to be treated as a perquisite. (In favour of Assessee)

Issue (iii): Whether GST is applicable if the applicant recovers part or whole of the cost charged by the canteen service provider from the employees.

Analysis: The Authority distinguished the concession/perquisite element from the portion paid by employees. It applied the definition of consideration and related-person transactions, and treated recoveries from employees as consideration for supply. The portion recovered from employees represents taxable consideration and is therefore a supply subject to GST; the unrecovered portion remains a perquisite and falls outside taxable supply.

Conclusion: GST is applicable on the amount recovered from employees for canteen services. The portion not recovered from employees is to be treated as a perquisite and is not taxable. (Recovered portion: In favour of Revenue; Unrecovered portion: In favour of Assessee)

Final Conclusion: The Authority rules that (a) provision of canteen services by the applicant to its employees through a third-party vendor constitutes a taxable supply by the applicant; (b) where no recovery is made from employees, the cost is a perquisite and not taxable; and (c) where recoveries are made from employees, the recovered amount is taxable while the unrecovered portion is a non-taxable perquisite.

Ratio Decidendi: Where an employer procures canteen services and provides them to employees, such provision constitutes a supply by the employer under the GST Act when consideration (including recoveries from employees) exists; however, amounts constituting employer-provided perquisites (no recovery or the concession element) are not taxable under Schedule III as interpreted with CBIC Circular No. 172/04/2022-GST.

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