TaxTMI 
TaxTMI 
TaxTMI 
2025 (7) TMI 263
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....e details of the questions on which advance ruling is sought are given above and are not being reproduced. 4. The contentions of the applicant: 4.1 The applicant submits that the in-house canteen is operated solely to comply with the statutory obligation under Section 46 of the Factories Act, 1948, which requires factories employing more than 250 workers to provide canteen facilities. This activity is not carried out in the course or furtherance of business under Section 7(1)(a) of the CGST Act, 2017. 4.1.1 The Company issues food coupons to the employees including the contract employees and they take food from the canteen using the food coupons. The food coupons are issued at subsidised rates to all employees. The Company pays GST in respect of the value of food supplied to the contract employees. Tax at 5% is paid on the value computed by adding 10% markup on the cost incurred for running the canteen in the proportion of contract employees out of the total employees. No GST is paid in respect of the food supplied to employees on the rolls of the Company relying on CBIC press release and circular 172/04/2022-GST. 4.1.2 The applicant relied on judicial precedents to support tha....
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....48 mandates that factories employing more than 250 workers must provide a canteen. The Act defines "worker" to include contract employees, making the provision of food an implied condition of employment. 6.2 The applicant submits that legal precedents from the Supreme Court of India and the Bombay High Court affirm that statutory obligations form implied terms in employment agreements. Accordingly, in SG Chemical and Dyes Trading Employees' Union v. SG Chemicals and Dyes Trading Limited and Dattatraya Shankarrao Kharde v. Executive Engineer, Chief Gate, the courts held that statutory provisions automatically become part of contracts, even if not explicitly mentioned. They also submitted that the High Court had taken the view that industrial laws regulating service conditions, such as the Minimum Wages Act and the Payment of Bonus Act, set mandatory employment terms. 6.3 The applicant further submits that every company with more than 250 employees must comply with Section 46 of the Factories Act, making the provision of food through a canteen a contractual obligation. Additionally, they also invited attention to CBIC press release dated 10-07-2017 which clarified that services....
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.... the company and contract employees as well. 7. Discussion and Findings: 7.1 On the Taxability of Subsidised Canteen Charges: 7.1.1 Section 7 of the CGST Act defines "supply" to include all forms of supply made in the course or furtherance of business for a consideration. However, the applicant's provision of food through its canteen does not qualify as a business activity but rather as a welfare measure arising out of statutory compliance. 7.1.2 The applicant has issued an Employee handbook which outlines standards of personal and professional conduct that all employees must strive to uphold and behave in an ethical and professional manner at all times. The Code provides a basis for all employees to maintain a working environment that is productive, positive, enjoyable, safe and free from harassment and discrimination. The canteen policy is a part of the Handbook (page 72 of the Handbook) and accordingly with the purpose of providing employees with nutritious and affordable meal options that support their health and well-being while enhancing productivity. This policy governs the administration, eligibility, and subsidized pricing of canteen services to ensure a positive d....
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....act workers employed in the premises of the principal employer fall within the scope of "worker" under the Factories Act and are entitled to statutory welfare measures, including canteen facilities. Similarly, in Dattatraya Shankarrao Kharde v. Executive Engineer, Chief Gate [1994 ILLJ 395 Bom], the Bombay High Court held that even in the absence of specific contract terms, statutory provisions like those under the Factories Act become implied terms of the employment relationship, enforceable by law. 7.1.6 From a GST perspective, CBIC Circular No. 172/04/2022-GST dated 06.07.2022 clarifies that any perquisite provided by an employer in terms of a contractual obligation (including those arising from statutory mandates) is not a "supply" under Section 7 of the CGST Act. Therefore, once canteen facilities are extended as part of legal obligations applicable to all "workers"-whether regular or contractual-the perquisite assumes the character of employment-related welfare and cannot be taxed, even if a partial cost recovery is made. 7.1.7 Therefore, excluding contract employees from the GST exemption would create an artificial and unlawful classification contrary to the spirit of the ....