AAR: Expenses recovered from employees for canteen services to attract GST

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New Delhi | Published: April 13, 2018 5:55:35 AM

An application for advance ruling on the matter was filed by filed by Malppuram-based company Caltech Polymers. The firm had submitted that its canteen exclusively served employees, and running expenses were being recovered from employees without any profit margin.

In what could raise the compliance burden of taxpayers under the GST, the Authority of Advance Ruling (AAR) in Kerala has ruled that the GST will be levied on recovery of food expenses from employees for canteen services provided by the employer.

In what could raise the compliance burden of taxpayers under the GST, the Authority of Advance Ruling (AAR) in Kerala has ruled that the GST will be levied on recovery of food expenses from employees for canteen services provided by the employer. “It is hereby clarified that recovery of food expenses from the employees for the canteen services provided by company would come under the definition of ‘outward supply’ as defined in section 2 (83) of the Act, 2017, and therefore, taxable as a supply of services under GST,” the AAR said in its ruling. It added that since the applicant recovers the cost of food from its employees, there is consideration as defined in the Act.

An application for advance ruling on the matter was filed by filed by Malppuram-based company Caltech Polymers. The firm had submitted that its canteen exclusively served employees, and running expenses were being recovered from employees without any profit margin. The applicant also said provisions of the Factories Act, 1948 mandated employer to provide canteen services if it employed more than 250 workers. Though the law limits applicability of an advance ruling only on applicant, experts said if a similar view is taken by the department, it could increase the compliance burden of various firms. As per the GST Act, an advance ruling pronounced by AAR is binding only on the applicant who has sought the advance ruling and on the officer concerned or the jurisdictional officer in respect of the applicant.

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