Order Date – 05 January 2024

Facts –

• The Applicant, M/s. Kohler India Corporation Pvt Ltd., entered into a contract with a canteen service provider (CSP) to provide canteen facilities to their workers at their factory premises. A part of the canteen charges is borne by the applicant whereas the remaining part is borne by their employees.
• The employees' portion of canteen charges is collected from employee's salaries and paid to the CSP by the applicant on behalf of employees. The amount so collected is without any commercial objective, or profit margin and to maintain discipline.

Issue –

• Whether the subsidized deduction made by the applicant from the employees would be chargeable to GST?

Order –

• The AAR observed that in terms of Circular No. 17210412022-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 are provided in terms of the contract between the employer and employee.
• Hence 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.
• Further held that Input Tax Credit will be available to the appellant in respect of canteen facility which is obligatory under the Factories Act, 1948, read with Gujarat Factories Rules, 1963. It is further held that the ITC on GST charged by the TSP will be restricted to the extent of cost borne by the appellant.