Order date – 29 November 2022

Facts –

• The Applicant, M/s Federal Mogul Goetze India Ltd, is a manufacturer of auto components ie. pistons, pistons pins & pistons rings and is engaged in manufacture, supply and distribution of the same used in two/three/four wheeler automobiles.
• The applicant entered into a contract with M/s Miitrapriya Enterprises for supply of manpower to operate and manage canteen within the factory premises and a part of the cost of the meal provided is deducted by the applicant from the salary of the employees on monthly basis.

Issue –

• Whether the subsidized meal provided by the applicant and deducted from employee’s salary would be considered as supply as per section 7 of the CGST/KGST Act? 
• Whether input tax credit charged by the service provider would be eligible for availment?

Order –

• The AAR observed that the applicant is charging the employees for the meals provided. Since the charges are pre-decided and deducted from the salaries, which are also agreed upon by the employees, contractual relationship is clearly established between the applicant and the employees.
• It is clear from the definition of consideration that the consideration incudes any payment made or to be made in response to supply of goods or services or both. Also in the instant case the applicant is running the canteen in connection with the manufacturing activity. Thus providing canteen facility is incidental to their main business and in the view of the above it is held that the activity of provision of canteen facility by the applicant to supply the food amounts to supply in terms of Section 7(1)(a) of the CGST Act 2017.
• It is also observed that as per Schedule II to Section 7(1A) of the CGST Act, 2017 the activity of providing/ supplying food through the canteen, run by the applicant amounts to supply of service and liable to GST accordingly. The applicant has to charge the GST in terms of Rule 30 or 31 at applicant’s option.
• The AAR held that that the services of the applicant are covered under services provided in canteen and other establishment and merit classification under SAC 996333. The said service attracts GST @ 5%, without ITC in terms of Sl no.7 of the Notification No. 11/2017 –Central Tax (Rate) 2017 dated 28.06.2017, as amended. Thus the applicant is not entitled to ITC of the GST paid on manpower supply services that are used for providing canteen facility.