Canteen services for employees out of GST net

Canteen services for employees out of GST net

Canteen charges collected from employees will now be outside the gamut of goods and services tax following a tax ruling that offers some relief to several large industrial and manufacturing units.

In a recent ruling, the Gujarat Authority for Advance Ruling (AAR) said that GST is not applicable on the amount collected from the employees towards canteen charges, which is paid to the canteen service provider.

Tax experts say this has been an issue of debate amongst several companies that have to provide food canteens as part of the existing law.

In most cases, a token amount is collected from the employees.

The AAR ruled that in cases where the company is not making any profits on this amount and merely acting as an intermediary, GST cannot be levied.

In earlier two AAR rulings, a different view was taken by two different authorities.

In the case of Tata Motors, the AAR had ruled that GST is not applicable on such an amount while in the case of Amneal Pharmaceuticals, a contrary view was taken in the ruling.

"The provision of canteen services for employees and GST payment thereon has been a matter of discussion across the industry and various rulings have been pronounced in favour of and against the applicant in the said matter," said Rakesh Nangia, managing partner of Nangia Andersen India. "In the backdrop of differing opinions from various authorities, appropriate clarification from the Central Board of Indirect Taxes and Customs may put to rest this issue and enable the industry to adopt a correct clear view."