Order date: 28 September 2022

• The applicant, M/s Zydus Lifesciences Ltd., is engaged in manufacture, supply and distribution of various pharmaceutical products. 
• The applicant is providing canteen for the use of its employees as to comply with section 46 of the Factories Act 1948. The applicant pay full amount to the canteen service provider for the food served during a prescribed period on behalf of the employees and a pre-determined percentage of the amount paid by the applicant is recovered from the employees without any profit. The balance amount is borne by the applicant is being treated as staff welfare expense towards subsidized food served to the employees. 
• The Canteen Service Provider raised GST invoice with tax rate of 5%. The applicant does not avail ITC of the GST component paid thereunder.
• The applicant states that it would not be a supply as per the provision of Section 7(2) of CGST Act. Thus it makes amply clear that any transactions which are provided by the employee to employer in the course/relation to the employment shall be out of the scope of GST. 

Issue

• Whether the subsidized deduction made by the Applicant from the employees who are availing food in the factory/corporate office would be considered as a supply by the Applicant under the provisions of Section 7 of Central Goods and Service Tax Act. 201 7 and Gujarat Goods and Service Tax Act,2017 ? 

Order 

• The AAR finds that the applicant has arranged a canteen facility for its employees, which is run by a Canteen Service Provider. As per their arrangement, part of the Canteen charges is borne by the applicant whereas the remaining part is borne by its employees. The said employees' portion canteen charges is collected by the applicant and paid to the Canteen Service Provider without any profit margin. 
• The applicant is providing canteen services to its permanent employees only. Thus it is as per the contractual agreement between the employee and the employer in relation to the employment. 
• As per the provisions of scheduled III and the clarification issued vide Circular No. l72lO4/2022-GST dated 06-07 -22. the provision of the services of transportation and canteen facility cannot be considered as supply of goods or services and hence cannot be subjected to GST. 
• Hence, the AAR held that subsidized deduction made by the Applicant from the employees who are availing food in the factory/corporate office would not be considered a supply under the provisions of Section 7 of Central Goods and Service Tax Act.