Order Date – 03 February 2024

Facts –

• The Applicant, M/s Suzuki Motor Gujarat Pvt Limited, provides canteen facility to its employees as obliged by the Factories Act, 1948. The applicant is providing canteen facilities to: their employees; employees of Suzuki Motors Corporation (for short-'SMC') on deputation; employees of Maruti Suzuki India Limited (for short-'MSIL') on business travel; temporary workers including team lease employees, who are on third party roll working within the factory premises.
• In the case of their employees, employees of SMC and employees of MSIL, 30% cost is borne by such employees while the applicant bears 70% of the cost. In the case of temporary workers, the applicant bears 70% of the cost. The CSP is issuing tax invoices to the applicant and charging GST @ 5%. The applicant is raising monthly invoice and charging 5% GST on the nominal amount recovered for the meals provided to its employees.

Issue –

• Whether the deduction of nominal amount made by the applicant from the employees who are availing canteen facilities in the factory premises would be considered as a 'supply’ 

Order –

• The AAR observed that in terms of circular No. 172/04/2022-GST, it is clarified 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 is provided in terms of the contract between the employer and employee. In view of the foregoing, it was held that the deduction made by the applicant from the employees who are availing food in the factory would not be considered as a 'supply' under the provisions of section 7 of the CGST Act, 2017. However, the aforementioned finding is only in respect of permanent employees.
• Even though, there is no profit as claimed by the applicant on the supply of food to its contractual worker, employees of SMC on deputation, employees of MSIL on business travel, there is indeed a "supply", as provided in Section 7(1)(a) of the CGST Act, 2017. The applicant would definitely come under the definition of "supplier", as per sub-section (105) of Section 2 of the CGST Act, 2017.
• Further held that ITC will be available to the applicant in respect of food and beverages as canteen facility is to be obligatorily provided under the Factories Act, 1948, read with Gujarat Factories Rules, 1963 as far as provision of canteen service for employees is concerned. It is further held that the ITC on GST charged by the CSP will be restricted to the extent of cost borne by the applicant only. 
• The applicant is not eligible to avail ITC in respect of the GST charged by the canteen service provider for the canteen facilities provided to employees of SMC on deputation, employees of MSIL. on business travel and temporary workers [including team lease employees who are on third party roll working within the factory premises] in terms of para 40. The applicant is not eligible to avail ITC in respect of the inputs i.e. equipment and kitchen utensils utilized for providing canteen facilities in terms of para 44.