TaxTMI 
TaxTMI 
2026 (9) TMI 1986
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....aving more than 100 employees working in the corporate office located at Torrent House, Ashram road, Ahmedabad and as per Section 23 of the Gujarat Shops and Establishments Act, the applicant is obliged to run and maintain a canteen for its' employees at the corporate office; that as part of the canteen facility, the applicant provides breakfast, snacks, lunch and dinner and in order to provide such food and beverages to its' employees, the applicant has engaged a canteen service provider. Further, the applicant is also registered under the Shops and Establishment Act. 3. The applicant has further submitted that they provide canteen facilities to their employees in terms of the canteen policy dated 01.04.2025; that Clause(1) of the canteen policy states that "the objective of this policy is to ensure the availability of hygienic, nutritious, and affordable meals to employees during working hours and by offering subsidized food services, the company aims to support employee well-being, satisfaction and convenience'; that at the Indrad plant and R&D unit, the applicant is deducting 50% of the cost of the meals from salaries of employees towards the canteen facility and remaining c....
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....rovider, does not retain any profit margin while recovering the amounts from its employees towards canteen facilities and the nominal amounts recovered by way of deduction from the salaries of its pay roll employees towards meals are only towards the expenditure/costs incurred by the applicant for providing such meals. • "Consideration' is one of the essential elements of "supply' under Section 7 of the CGST Act, 2017; that as per Section 2(31)(a) of the CGST Act, "consideration' is defined as "payment made in respect of supply of goods or services or both, whether by the recipient of service or by any other person'; that the applicant has no legal intention to enter into a contract with its employees for the exclusive supply of canteen facility, hence nominal amounts recovered by the applicant from the employees is not to be treated as "consideration' since it is not premised on the enforcement of any reciprocal obligations and cannot be linked to a "supply' for the purpose of levy of GST. • The applicant has relied on: (i) the decision of Gujarat Advance Ruling Authority in M/s. Alleima India Pvt. Ltd. reported at 2024-VIL-113-AAR. (ii)....
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....t Indrad plant and R&D facility. Section 46 of the Factories Act reads as under: "Section 46 - Canteens (1) The State Government may make rules requiring that in any specified factory wherein more than two hundred and fifty workers are ordinarily employed, a canteen or canteens shall be provided and maintained by the occupier for the use of the workers. (2) Without prejudice to the generality of the foregoing power, such rules may provide for- (a) the date by which such canteen shall be provided; (b) the standards in respect of construction, accommodation, furniture and other equipment of the canteen; (c) the foodstuffs to be served therein and the charges which may be made therefore; (d) the constitution of a managing committee for the canteen which are not to be taken into account in fixing the cost of foodstuffs and which shall be borne by the employer; (dd) the items of expenditure in the running of the canteen which are not to be taken into account in fixing the cost of foodstuffs and which shall be borne by the employer; (e) the delegation of the Chief Inspector, subject to such conditions as may....
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....as "perquisite' in terms of Circular No. 172/04/2022-GST dated 06.07.2022-GST dated 06.07.2022. (ii) They are eligible to avail ITC in respect of the GST paid on inward supply of canteen services used for providing canteen facility to its employees at the Indrad plant, R & D facility and corporate office, since the input service is used in the course of furtherance of business of the applicant and maintaining such canteen is mandatory in terms of the Factories Act and the Gujarat Shops & Establishment Act. 6. Personal hearing was granted on 29.05.2026 wherein Ms. Priyanka Kalwani & Ms. Aanchal Trivedi, both Advocates, appeared on behalf of the applicant and reiterated the facts & grounds as stated in the application. During the course of personal hearing, they submitted copies of rulings/supporting documents for the applicant. Discussion and findings 7. At the outset, we would like to state that the provisions of both the CGST Act and the GGST 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 provisions under the GGST A....
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....er SAC 996333 and charging GST @5% and that the applicant is not availing input tax credit of the GST paid to the canteen service providers. 11. The applicant is seeking Advance Ruling on the following questions: (1) Whether GST is liable to be discharged on the portion of the amount recovered by the applicant from its employees towards the canteen facilities provided to the employees at the Indrad plant, R & D unit and corporate office? (2) Whether the applicant is eligible to avail input tax credit of the GST charged by the canteen service provider for the canteen facility provided to its employees at the Indrad plant, R & D facility and corporate office? 12. Before dwelling into the issue on hand, we would like to reproduce the relevant provisions/circular for ease of reference which are as under: Section 7. Scope of supply,- (1) For the purposes of this Act, the expression "supply' includes- (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; (....
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.... services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) except when used for the purposes specified therein, life insurance and health insurance: Provided that the input tax credit in respect of such goods or services or both shall be available where an inward supply of such goods or services or both is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply; (ii) membership of a club, health and fitness centre; and (iii) travel benefits extended lo employees on vacation such as leave or home travel concession: Provided that the input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force. CBIC's press release dated 10.7.2017 Another issue is the taxation of perquisites. It is pertinent to point out here that the services by an employee to the employer in the course of or in relation to hi....
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.... sub-clause (iii) of clause (b) of sub-section (5) of section 17 of the CGST Act is applicable to the whole of clause (b) of sub-section (5) of section 17 of the CGST Act. 5 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 supply 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 there from 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....
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....nd in any part of which a manufacturing process is being carried on without the aid of power, or is ordinarily so carried on,- but does not include a mine subject to the operation of [the Mines Act, 1952 (35 of 1952)], or [a mobile mobile unit belonging to the armed forces of the Union, railway running shed or a hotel, restaurant or eating place. Explanation I: For computing the number of workers for the purposes of this clause all the workers in [different groups and relays] in a day shall be taken into account; Explanation II: For the purposes of this clause, the mere fact that an Electronic Data Processing Unit or a Computer Unit is installed in any premises or part thereof, shall not be construed to make it a factory if no manufacturing process is being carried on in such premises or part thereof;] 13.1 Section 46 of the Factories Act, 1948 reads as under: Section 46. Canteens - (1) The State Government may make rules requiring that in any specified factory wherein more than two hundred and fifty workers are ordinarily employed, a canteen or canteens shall be provided and maintained by the occupier for the use of the workers.] ....
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.... 8.45 pm Tea/Snacks *- Out time 11.30 pm-11.45 pm Tea - In time 10.40 pm-10.55 pm Night Tea/Snacks* 1.55 am to 2.10 am Tea/Snacks' - Out time 7.15 am to 7.30 am Employees must adhere to the designated timing for each meal service to ensure efficient operations and minimize disruptions. 3. Canteen Charges and Deductions (subsidy): To make meals affordable, the company provides 50% subsidy on breakfast, meal and snacks rates. The applicable charges to be deducted directly from the employee's monthly salary. For R & D Center 1. Objective of the Policy: The objective of this policy is to ensure the availability of hygienic, nutritious and affordable meals to employees during working hours. By offering subsidized food services, the company aims to support employee well-being, satisfaction and convenience. 2. Canteen Facilities: Company-operated canteen will provide the following meals as per time: Particulars A-Shift G-Shift B-Shift C-Shift Shift timings 7.00 am - 3.30 pm 9.00 am - 6.00 pm 3.00 pm - 11.30 pm 11.00 pm - 7.45 am Breakfast/Tea 6.45 a....
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....or purpose of gain or not, any business, trade or profession or work in connection with or incidental or ancillary thereto; (iii) shop, residential hotel, restaurant, eating house, theatre or other place of public amusement or entertainment; to whom the provisions of the Factories Act, 1948 do not apply; (iv) such other establishment as the State Government may, by notification in the Official Gazette, declare to be an establishment for the purpose of this Act; 14.1 Further, section 23 of the said Act states as follows: "23. The employer shall provide and maintain in the shop or establishment, where is not less than one hundred workers are employed or ordinarily employed to maintain a canteen for the use of its workers: Provided that if a group of shops or Establishments decide to provide a common canteen, then the same shall be permitted by the Inspector by an order, subject to such conditions as may be specified in the order." 14.2 Further, the applicant has provided a copy of the agreement for canteen services to employees under the head Canteen Facility Policy in respect of their Corporate office. Relevant portion of the same is reprodu....
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....ant. In this connection, before proceeding further, certain factual aspects which we would like to mention, though at the cost of repetition are as under: • that they employ 250 employees at their factory located at Indrad Village, Ahmedabad-Mehsana Highway at Mehsana, 250 employees at their R & D facility located at Bhat at Ahmedabad and more than 100 employees at their corporate office located at Torrent House, Off. Ashram road, Ahmedabad. • that Section 17(5)(b) ibid, was amended on 1.2.2019; • that the applicant is mandated vide Section 46 of the Factories Act, 1948 to provide canteen facility to its employees within the factory premises in Indrad village and R & D facility at Bhat in Ahmedabad and in terms of Section 23 of the Gujarat Shops and Establishment (Regulation of Employment and Condition of Service) Act, 2019 to provide canteen facility to its employees at the Corporate office; • that Circular No. 172/4/2022-GST clearly clarifies that post substitution, effective from 1.2.2019, based on the recommendation of the GST council in its 28th meeting, the proviso after sub clause (iii) of clause (b) of Section 17(5) of the....