TaxTMI 
TaxTMI 
2026 (2) TMI 457
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....vided by KSB to its employees, whether GST would be applicable if KSB Limited recovers from employee's part or whole of the cost charged by the canteen service provider to KSB? At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, the expression 'GST Act' would mean CGST Act, 2017 and MGST Act, 2017. 1. FACTS AND CONTENTION - AS PER THE APPLICANT 1.1 KSB Limited ('the Applicant' or 'the Company') is engaged in the business of manufacturing and selling of liquid handling pumps for various applications. 1.2 The Applicant's Registered office is located at Office No. 601, Runwal R-Square, LBS Marg, Mulund (West) Mumbai - 400 080 and manufacturing facility is located at 5 different locations in Maharashtra. 1.3 Applicant is registered under Central Goods and Services Tax Act, 2017, Maharashtra Goods and Services Tax Act, 2017 and I....
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.... Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / MGST Act would be mentioned as being under the 'CGST Act'. 2.3 In terms of Section 9 of CGST Act, GST is levied on 'Supply'. 2.4 Section 7(1) of the CGST Act provides an inclusive definition of the term 'Supply' as below: a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business, b) import of services for a consideration whether or not in the course or furtherance of business, and, c) the activities specified in Schedule I, made or agreed to be made without a consideration; 2.5 On the basis of above, for an activity to qualify as supply, it is inter alia required to be made in the course or furtherance of ....
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....red amount to cover all its expenses and would have in fact earned profits. However, in the instant case, the Applicant is bearing all such canteen expenses itself. Therefore, it is amply clear that it is not a business activity of the Applicant. 2.15 The Applicant submits that since it is not engaged in the business of canteen services, facilitation of canteen services between employees and vendor cannot be regarded as 'business' or 'supply of services in the course or furtherance of business'. 2.16 The above view is also supported by the Advance Ruling pronounced by the Maharashtra Authority for Advance Ruling (AAR') in case of M/s. Posco India Pune Processing Center Private Limited (2019-TIOL-25-AAR-GST). In this case the issue was whether premium amounts recovered from employees for the group insurance provided to employees and their parents was liable to GST. 2.17 It was observed by the AAR that, "They (M/s Posco) have already submitted that they are primarily engaged in the distribution of steel coils and also perform low value-added processing function in respect of some of the traded goods based on customer's requirement. The Applicant has brought nothing on record....
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.... inferred that an incidental or ancillary transaction can be one which is integral to the main business of the company, though little bit lesser in importance to the primary. Selling a plastic pipe with the pump or providing installation services of the pump could fall in the nature of activities incidental or ancillary. The Applicant submits that, on the other hand the canteen facility for the employees cannot be categorized as an incidental or ancillary activity to the business of selling pumps as it is not at all integral to the main business of the Company i.e. selling pumps. 2.26 Therefore, in terms of the definition of business u/s 2(17) of the CGST Act, canteen facility provided is definitely not an activity done in the course of or in furtherance of business as it is not the business in to provide canteen services nor it is incidental or ancillary to the activity of manufacturing and selling pumps as explained in the previous para. Therefore, it cannot be treated as Supply and no GST can be charged on it. 2.27 Further, Central Board of Indirect Taxes and Customs, in Press Release dated 13 July 2017, had clarified that an activity that cannot be said to be in the cours....
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....e of business" As already explained above, activity of providing canteen facility to employees is not in the course or furtherance of business. Hence, the activity will not fall under the above clause. 2.34 Further, proviso to the above clause states that: "Provided that gifts not exceeding fifty thousand rupees in value in a financial year by an employer to an employee shall not be treated as supply of goods or services or both" The applicant believes, without admitting, that even if for the sake of argument, it is accepted that providing food/ tea etc. is in the nature of a goodwill gesture/gift, and therefore liable to GST as supply being a specified activity without consideration. The Company would like to submit that value of canteen facility provided by the Company does not exceed INR 50,000 per employee in a financial year (the cost is less than Rs. 2500 per month or Rs 30,000 per annum). Therefore, even if providing canteen facility is treated as gift, no GST would be applicable as amount does not exceed prescribed limit i.e. INR 50,000/- per employee. Basis above, provision of canteen facility to employees should not be taxable. 2.35 It is imperative t....
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.... percent on input to the Applicant plus 5 percent on the output) which definitely is not the intention of the Government when it put such food related services under lower rate of tax. Scenario when employee directly procures the canteen services • In case the exact same services are directly procured by employees from the canteen vendor then the GST cost would be 5 percent i.e., the GST charged by the vendor to employee 2.39 It is noteworthy that same transaction having different GST tax cost is not the intention of law. The Applicant is not provider of service rather it is receiving services. 2.40 Canteen services are not actually provided by the applicant. In this case, service provider is a vendor. Therefore, there is no supply of canteen services from the applicant to its employees. GST should not be applicable on the same. 2.41 It is submitted that Applicant is not provider of canteen services rather it is receiver of canteen services provided by vendor. Employees are user of such services. 2.42 In this regard, reliance is placed in case of Advance Ruling in case of Tata Motors Limited GST ARA-23/2019-20/B-46 (Annexure H). Issue in this case was....
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....ring and selling of liquid handling pumps. They have four manufacturing units at different locations and different cities. As per Section 46 of the Factories Act, 1948 it is mandatory on them to provide canteen facilities to their employees Therefore, they are providing canteen facilities to their employees. As per their submission that to give canteen facility to their employee they have given canteen contract to third person who runs the canteen and give facility to their employee. That third person is charging them sum amount per employee and the applicant is bearing the expenditure. In short, the applicant is not running the canteen through appointed persons. Earlier, their some units were running the canteen at their own. They had appointed regular employee and purchasing of grocery etc required to run the canteen were done by their employees. Now they have given contract to other outside person (contractor) and the said outside contractor on behalf of them giving canteen facility to their employees. For providing this facility, the said outside contractor is charging applicant sum charges per person as per agreement and the applicant is paying the same and it is expenditure f....
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....he CGST Act, 2017 as below; Outward supply in relation to a taxable person means supply of goods or services or both, whether by sale, transfer, barter, exchange, licence, rental, lease or disposal or any other mode, made or agreed to be made by such person in the course or furtherance of business" The Term "business" is defined in Section 2(17) of the CGST Act, which reads like this: "business" includes: a. any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit b. any activity or transaction in connection with or incidents or ancillary to nib-clause (a): 3.4 From the plane reading of the definition of "business", it can be concluded that the supply of food by the applicant to its employees would definitely come under clause (b) of Section 2 (17) if the CGST Act as a transaction incidental or ancillary to the main business. 3.5 Schedule II to the CGST Act, 2017 describes the activities to be treated as supply LING AL of goods or supply of services. As per Clause 6 of the Schedule the following Composite supply is declared as supply of service: ....
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....manufacturer of goods of HSN CTH 73 & 84 and not as service provider of Catering services. 3.8 Further, at Para 6 of the said agreement it is mentioned that "For the Services rendered by the Service Provider, the company agrees to pay the service provider at the monthly rates stipulated in the "Annexure B (Actual found in Annexure C) for the said services. Service Tax, if applicable will be paid extra" 3.9 As per from Point No. 07 to 14 of Agreement, all liability will be of service provider for Catering Services. 3.10 Further, as per the sample invoice issued by vendor, the HSN/SAC is declared as 996331 which is applicable for Restaurant/cafes and not canteen services. The correct HSN Code for Canteen services is 996333. 4. HEARING Preliminary hearing in the matter was held on 15.02.2022. Mr. Mohammad Poonawala CA, Smt. Ankita Shah CA, & Mr. Madhur Haralkar CA had attended while Jurisdictional Officer was not available. The application was admitted and called for final hearing on 17.09.2025. Shri Mohammad Poonawala (CA), Shubham Modani (CA) authorized representative, appeared and made oral and written submissions. Jurisdictional Officer Shri Harishchandr....
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....ncurred for lighting and ventilation and e) the interest on the amounts spent on the provision and maintenance of furniture and equipment provided for the canteen. Thus, we find that the said Act and Rules do not mandate supply of free food by the factory to the employees. All that is mandated is provision of canteen facility and a restriction on the amount that can be recovered from the employees i.e. the food should be sold on non-profit basis. 5.1.4 It is seen from the copy of invoice submitted, the applicant has engaged third party service provider M/s. FF Services Private Limited, who are providing the said canteen facilities to the Applicant. Since, the said service is provided by the third-party service provider to the Applicant, the service provider is raising their invoices with applicable GST to the Applicant. The Applicant pays the consideration to the third-party service providers for the said canteen facilities. 5.1.5 Applicant has contended that providing canteen facility to its employees is not in the course or furtherance of business. Providing canteen facility to its employees does not amount to supply of services as per the applicable provisions ....
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....ctionaries as under: Oxford Dictionary - the happening as part of something more important. Cambridge Dictionary - less important than the thing something is connected with or part of Dictionary.com - happening or likely to happen in an unplanned or subordinate conjunction with something else. Similarly word 'ancillary' has been defined as under: Oxford Dictionary - provide necessary support to the main work or activities of an organisation. - In addition to something else but not as important. Cambridge Dictionary: providing support or help. Dictionary.com - supporting, secondary, subsidiary (3) The reading of all above definitions clarify that any activity, which supports the main activity or necessary to carry out the principal activity, is an activity or transaction in connection with or incidental to or ancillary to the principal activity. The activity of providing food in canteen to its workers who are pivotal to his principal activity can definitely be said to be in connection with or incidental or ancillary to his main activity of manufacture and sale of liquid handling pumps for various applications. (4) ....
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....6.07.2022 of CBIC, the relevant extract of the said circular is reproduced hereunder for ease of reference: S.No. Issue Clarification Whether various perquisites provided by the employer to its employees in terms of contractual agreement entered into between the employer and the employee are liable for GST? 1. Schedule III to the CGST Act provides that "services by employee to the employer in the course of or in relation to his employment" will not be considered as supple of goods or services and hence GST is not applicable on services rendered by employee to employer provided they are in the course of or in relation to employment. 2. Any perquisites provided by the employer to its employees in terms of contractual agreement entered into between the employer and the employee are in lieu of the services provided by employee to the employer in relation to his employment. It follows therefrom that perquisites provided by the employer to the employee in terms of contractual agreement entered into between the employer and the employee, will not be subjected to GST when the same are provided in terms of the contract between the employer and employee. 5.2.2 ....
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....ces such as canteen services by the employer to employee were to not fall under 'business', it would not be necessary to provide respite to 'supplies by employer to employees given as perquisite' from falling under 'supply' by taking recourse to schedule III. That is, if a transaction or activity is not a supply u/s 7(1) of CGST Act, then there would not be necessity to place such a transaction u/s 7(2)(a) for deeming it to be neither supply of goods nor supply of services. Hence, as discussed in Para (5.1.6 & 5.1.7) Applicant's activity of supply of canteen services falls u/s 7(1) of CGST Act, 2017. As discussed in Para 5.2.4, only the perquisites i.e., free supplies, in terms of a contractual agreement between the employer and employee are not to be subjected to GST as these are in lieu of the services provided by employee to the employer in relation to his employment. Hence, the recoveries made from the employees are liable to levy of tax as it is consideration against canteen services provided by the Applicant to the employees. 5.2.6 The Applicant has relied on the following Rulings. (1) Gujarat AAAR in Tata Motors Limited (Guj/GAAR/R/39/2021 dated 30th July 2021). ....
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....ulings in case of Himachal Pradesh AAAR dated 26.09.2023 in case of M/s Federal-Mogul Anand Bearings India Limited, Tamil Nadu AAR dated 05.05.2023 in case of M/s Kothari Sugars and Chemicals Limited and Tamil Nadu AAR dated 20.12.2023 in case of M/s Faiveley Transport Rail Technologies India Private Limited. 5.3 Value in respect of which canteen services are taxable. 5.3.1 As explained in above paras, supply of canteen services to the employees would in normal course constitute to be the supply of services u/s 7 (1) of GST Act 2017. However, it is now clarified by the CBIC circular No. 172/04/2022/GST dated 6th July 2022 that perquisite provided to the employees in view of the Contractual Agreement would not be subjected to GST. It is clarified that such perquisite are in lieu of the services provided by the employees to the employer in the course of or in relation to his employment, and should not be subjected to GST. Supplies of any services would not be subjected to GST only under the following circumstances. (1) Such services are exempt under the notification number 12/ 2017, CT(R) dated 28/06/2017. (2) Such a transaction in services is a non-GST sup....
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....ite given to the employees in view of the contractual agreement are in lieu of services given by the employee to the employer and should not be subjected to GST'. As the supply of perquisite by the employer to the employee would not have respite from above two aspects mentioned at Sr. No. 1 and 2 above as the said supply is neither exempted nor a Non-GST supply, it would be appropriate to interpret that the perquisite given to the employees in view of the contractual agreement are in lieu of services given by the employee to the employer and would not be subjected to GST by deeming it to be part of Schedule III as a corollary to entry at Sr. No. 1 of Schedule III for cohesive interpretation. 5.3.6 If the applicant does not recover any amount from the employees, then, the entire value of the services for which no amount is charged is the perquisite provided by the employer to the employees. As this perquisite is in lieu of services of the employees to the employer which fall under schedule 3, the perquisite part is not taxable, as a corollary, deeming it to be falling in the said entry of schedule 3. As the entire value is the perquisite provided by the employer, it is not liable....