Employee recoveries for canteen and transport are taxable supplies, while notice pay recovery is not subject to GST.

Employee recoveries for subsidised canteen and non-air-conditioned bus transport were treated as taxable supplies under GST because the employer provided the facilities to employees for consideration in the course of business; GST was payable on the recovered amounts, and input tax credit on those inward services was not available under the applicable credit and rate restrictions. Recovery of notice pay from employees who left before serving the agreed notice period was not treated as consideration for any independent taxable service, but as a contractual deterrent, and was therefore not liable to GST.

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Issues: (i) Whether deduction of a nominal amount from employees' salary towards canteen facility amounts to supply of service and is taxable under GST, and whether input tax credit on canteen services is available; (ii) Whether deduction of a nominal amount from employees' salary towards non-air-conditioned bus transportation facility amounts to supply of service and is taxable under GST, and whether input tax credit on transport services is available; (iii) Whether recovery of salary in lieu of notice pay from employees who do not serve the full notice period is liable to GST.

Issue (i): Whether deduction of a nominal amount from employees' salary towards canteen facility amounts to supply of service and is taxable under GST, and whether input tax credit on canteen services is available.

Analysis: The canteen facility was provided through third-party service providers and the employees paid a subsidised portion through salary deduction, while the balance was borne by the employer. The arrangement was treated as arising in the course of business and not as a mere free perquisite, because only the concession element could be linked to employment benefits. The Authority also held that the employer was supplying the canteen facility to employees for consideration, and that the blocked credit restriction under section 17(5)(b) was not displaced merely because canteen maintenance was statutorily required; however, the credit was denied on the separate reasoning that the canteen service was taxed at the concessional rate prescribed without input tax credit under the relevant rate notification.

Conclusion: The nominal recovery for canteen facility is taxable as a supply of service, GST is payable on the recovered amount, and input tax credit on the canteen service is not available to the applicant.

Issue (ii): Whether deduction of a nominal amount from employees' salary towards non-air-conditioned bus transportation facility amounts to supply of service and is taxable under GST, and whether input tax credit on transport services is available.

Analysis: The transport facility was arranged through third-party bus operators and was available only to employees under the employment arrangement, with a subsidised amount recovered from salaries and the balance borne by the employer. The Authority held that this arrangement constituted a taxable supply by the employer to employees for consideration and within the scope of business, and that the recovery did not fall outside GST merely because the transport was provided as a workplace benefit. For credit, the Authority held that input tax credit was not available, relying on the nature of the transportation service and the applicable credit restrictions and rate structure governing passenger transport by non-air-conditioned contract carriage.

Conclusion: The nominal recovery for transportation facility is taxable as a supply of service, GST is payable on the recovered amount, and input tax credit on the transport service is not available to the applicant.

Issue (iii): Whether recovery of salary in lieu of notice pay from employees who do not serve the full notice period is liable to GST.

Analysis: The notice pay recovery was treated as a contractual deterrent or penalty arising from premature resignation, not as consideration for any independent service of tolerating an act or situation. The Authority relied on the CBIC clarification that such recoveries are not made in exchange for any service to the employee and therefore do not constitute taxable consideration under the GST law.

Conclusion: Recovery of notice pay from employees who fail to serve the agreed notice period is not liable to GST.

Final Conclusion: The ruling sustains taxability of the employer's recoveries for canteen and transport facilities, denies input tax credit on those inward supplies, and exempts notice pay recoveries from GST.

Ratio Decidendi: A recovery from employees is taxable where the employer supplies a facility to employees for consideration in the course of business, but notice pay recovered as a contractual deterrent for premature resignation is not consideration for a taxable service.

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