In M/s Tata Motors Ltd. [Advance Ruling No. GUJ/GAAR/R/39/2021 dated July 30, 2021], M/s Tata Motors Ltd (“the Applicant”) has sought a clarification whether Input Tax Credit (“ITC”) will be available on Goods and Services Tax (“GST”) charged by service provider on canteen facility provided to employees working in factory and whether the same would be restricted to extent of cost borne by the Applicant. Along with that it has also been sought if GST is to be applicable on Nominal amount received by Applicant for usage of the canteen facility by the employees.
The Hon’ble Gujarat Authority of Advance Ruling (“GAAR”) interpreting Section 17(5)(b)(i) and 17(5)(b)(iii) of Central Goods and Services Act, 2017 (“CGST Act”) which provides for supply of goods and services, observed that the two clauses are not connected to each other on the basis of punctuation used at the end of provisions. Laid down the principle that “Colons and semicolons are two types of punctuation” whereby “Semicolons are used to join two independent clauses/ subclauses, or two complete thoughts that could stand alone as complete sentences”.
Further observed ITC on GST paid on Canteen Facility is blocked credit under Section 17(5)(b)(i) of the CGST Act and thereby the same being inadmissible. GST is not leviable on the Applicant on the amount which represents employees’ canteen charges.
Noted that the arrangement of canteen by the Applicant is run by a Third-Party Canteen Service Provider (“CSP”) due to which the Appellant recovers nominal amount on monthly basis. The expenditure of the service is borne solely by the Applicant and thus is part and parcel of cost to the company.
Our Comments
- The Kerala Authority of Advance Ruling (“KAAR”) in Caltech Polymers Pvt. Ltd. [Order No. CT/7726/2018-03 dated September 25, 2018] ruled that GST will be liable on recovery of food expenses from employees for canteen services provided by the company as the same being covered under “outward supply” in terms of Section 2(83) of CGST Act, 2017.
- Press Release issued by Central Board of Indirect Taxes and Customs (“CBIC”) dated July 10, 2017 providing clarification on GST on Gifts observed that supply by the employer to the employee in terms of contractual employment agreement entered into between employer and employee will not be subjected to GST.
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