The Maharashtra Authority of Advance Ruling (AAR) has held that the Goods and Service Tax (GST) is payable on the amount deducted from employee salaries for factory meals.
The bench of D. P. Gojamgunde and Priya Jadhav have observed that the value of the outward supply of canteen and transportation service may be considered as having two parts. First part is the amount of recovery that is made from the employees, and second part is the balance value of the services provided by the employer as a perquisite which is in lieu of the services provided by employees to the employer.
The bench stated that the entire balance value of the
services for which no amount is charged is the perquisite provided by the employer to the employees. As this part is in lieu of services of the employees
to the employer which falls under schedule 3, the perquisite part is not taxable, as a corollary, deeming it to be falling in the said entry of schedule.
The AAR stated that though the employer and employee are related parties, the value on which tax is liable to be paid is only the recovered amount from the employee as the remaining part of the value is the perquisite provided by the employer which i s not liable to be taxed.
The applicant is engaged in the business of design, manufacture and distribution of palletized material handling equipment including diesel forklift, electrical forklift and other warehousing equipment.
The Applicant has employed more than 250 workers at its factory premises, there are provisions relating to the maintenance and provision of canteen facilities for the use of the workers.
Pursuant to the Canteen Policy, where employees avail the canteen facility provided by the Applicant, the Applicant would deduct IN 450 as cost of such canteen facilities from the salary of the employee on a monthly basis. The balance monthly cost of the facilities is borne by the Applicant. The cost borne by the employee is deducted from the salary on a monthly basis which is also visible in the salary slip.
The applicant sought the advance ruling on the issue whether the deduction of a nominal amount by the Applicant from the salary of employees for availing food provided in the factory premises is a “Supply of Service” under Section 7 of the CGST Act, 2017 and the Maharashtra GST Act, 2017?
The AAR held that GST only to the extent of recoveries made from the employees.
Ruling Details
Applicant Name: M/s.KION INDIA PVT LTD
Date: 27/03/2025
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