GST on employee recoveries: subsidised canteen charges taxable, while notice pay recoveries are outside GST.

Amounts recovered from employees for subsidised canteen facilities were treated as consideration for the employer's outward supply made in the course or furtherance of business, because the canteen service was incidental to the manufacturing activity and formed part of the employment arrangement; GST was therefore payable, and input tax credit was not available on the recovered amount. Notice pay recoveries for non-fulfilment of the notice period were characterised as compensation or penalty for breach of employment terms, not as consideration for any supply or toleration service; GST was therefore not payable on such recoveries.

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Issues: (i) Whether GST is payable on recoveries made from employees' salary towards canteen facility provided at subsidised rates. (ii) Whether GST is payable on notice pay recoveries for non-fulfilment of the notice period.

Issue (i): Whether GST is payable on recoveries made from employees' salary towards canteen facility provided at subsidised rates.

Analysis: The canteen facility was held to be supplied by the employer to employees in the course or furtherance of business, as the activity was incidental or ancillary to the principal manufacturing activity and formed part of the employment arrangement. The Authority also treated the subsidised recovery from employees as consideration for that supply. The exclusion for services by an employee to an employer in Schedule III was held not to cover the employer's outward supply of canteen services, and the exemption for perquisites was limited to the concession portion, not the amount recovered from employees.

Conclusion: GST is payable on the amount recovered from employees towards the canteen facility, and input tax credit is not available on that recovered amount.

Issue (ii): Whether GST is payable on notice pay recoveries for non-fulfilment of the notice period.

Analysis: The notice pay recovery was treated as a penalty or compensation for breach of the employment terms, not as consideration for any supply or for agreeing to tolerate an act. The Authority relied on the departmental circular clarifying that such recoveries are made to deter premature quitting and do not represent taxable consideration for a toleration service.

Conclusion: GST is not payable on notice pay recoveries for non-fulfilment of the notice period.

Final Conclusion: The ruling confirms taxability of employee recoveries towards subsidised canteen services, while excluding notice pay recoveries from GST.

Ratio Decidendi: Amounts recovered from employees are taxable where they represent consideration for an employer's outward supply in the course or furtherance of business, but recoveries made as compensation or penalty for breach of employment terms do not amount to consideration for a taxable supply.

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