Single-page GST filing system to be ready in 3-6 months says Finance Secretary Hasmukh Adhia :      E-Way Bill in 6 States for intra-State movement of goods from 20th April. Maharashtra will introduce from 1st May :      GST Council keeps Reverse Charge Mechanism on hold - FinMin clarifies that businesses under composition levy need not furnish related data in GSTR-4 :      GST returns filing: Sushil Modi panel unveils new fusion model :      CBITC sets out procedure to intercept, inspect, detain, seize, release, confiscate goods and conveyances in transit :      Bombay HC - GST leviable on any "consideration" including one-time premium on lease :      Canteen Services will attract 5% GST says Advance Ruling Authority :     

AAR GST Kerala : Caltech Polymers : whether recovery of food expenses from employees for the canteen provided by company comes under the definition of outward supplies are taxable under GST Act : 26th March, 2018

AUTHORITY FOR ADVANCE RULING – KERALA
Tax Tower, Killippalam, Karamana P. 0, Thiruyananthapuram - 695 002
e-mail id: aar.gst@'kerala.goy.jn

PROCEEDINGS OF THE AUTHORITY FOR ADVANCE RULING
U/s.98 OF THE GOODS AND SERVICES TAX ACT, 2017.

Members present are:
1. Senthil Nathan S, IRS
Joint Commissioner,
Office of the Commissioner of Central Tax Et Cents! Excise, Thiruvananthapuram.

2. N. Thulaseedharan Pillai.
Joint Commissioner (General),
Office of the Commissioner of State Taxes, Thiruvananthapuram.

Sub:- GST Act, 2017 - Advance Ruling U/s 98 - whether recovery of food expenses from employees for the canteen provided by company comes under the definition of outward supplies are taxable under GST Act –

Orders issued.

Read:-Application dated 30.12.2017 from MIs. Caltech Polymers Pvt. Ltd.

ORDER No. CT/531118-C3 DATED 26/03/2018

1. M/s. Caltech Polymers Pvt. Ltd., Malappuram (hereinafter called the applicant or the Company) has preferred an application for Advance Ruling on whether recovery of food expenses from employees for the canteen service provided by the applicant I company comes under the definition of outward supplies and are taxable under Goods& Service Tax Act.

2. The applicant is a Private Limited Company engaged in the manufacture and sale of footwear. It is submitted that they are providing canteen services exclusively for their employees. They are incurring the canteen running expenses and are recovering the same from its employees without any profit margin.

3. The applicant has further submitted that the service provided to the employee is not being carried out as a business activity. It is according to the provisions of the Factories Act, 1948. As per section 46 of the said Act, any factory employing more than 250 workers is required to' provide canteen facility to its employees. The applicant detailed the work as follows:-

a) The space for the canteen is provided by the Company, inside the factory premises.

b) The cook is employed by the Company and is paid monthly salary.

c) The vegetables and other items required for preparing the food items are purchased by the Company directly from the suppliers.

d) The number of times, the Canteen facility is availed, each day, by the employees is tracked on a daily basis.

e) Based on the details above, the expenditure incurred by the Company on the vegetables and other items required for preparation of food is recovered  from the employees, as a deduction from their monthly salary, in proportion to the foods consumed by them.

f) The company does not make any profit while recovering the cost of the food . items, from the employees. Only the actual cost incurred for the food items is recovered from the employees.

4. The company is of the opinion that this activity does not fall within the scope of 'supply', as the same is not in the course or furtherance of its business. The company is only facilitating the supply of food to the employees, which is a statutory requirement, and is recovering only the actual expenditure incurred in connection with the food supply, without making any profit.

5. The company also referred to the Mega Exemption Notification No. 25/2012 - ST dated 20.06.2012 issued by the Government of India whereby services in relation to supply of food or beverages by a canteen maintained in a factory covered under the Factories Act, 1948was exempted under the Service Tax Law.


6. The applicant, in their application dated 30-12-2017, raised the following questions to be determined by the authority for Advance Ruling.

"Whether reimbursement of food expenses from employees for the canteen provided by company comes under the definition of outward supplies as taxable under GST Act.”

7. The authorised representative of the applicant was heard in the matter and the contentions raised were examined.

8. It is true that in the pre-GST period, vide Sl No. 19 and 19A of Notification No. 25/2012 ST dated 20.60.2012 as amended by Notification No. 14/2013-Service Tax dated 22.10.2013 the 'services provided in relation to serving of food or beverages by a canteen maintained in a factory covered under the Factories Act, 1948 (63 of 1948), including a canteen having the facility of air-conditioning or central air-heating at any time during the year' was exempted from service tax. But, there is no similar provision under the GST laws.

9. The term "business" is defined in Section 2(17) of the GSTAct, which reads like this:-

"business" includes:- (a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit:

(b) any activity or transaction in connection with or incidents! or ancillary to sub-clause (a); ...

From the plane reading of the definition of "business", it can be safely concluded that the supply of food by the applicant to its employees would definitely come under clause (b) of Section 2(17) as a transaction incidental or ancillary to the main business.

10. Schedule II to the GSTAct describes the activities to be treated as supply of goods or supply of services. As per clause 6 of the Schedule, the following composite supply is declared as supply of service.·

"supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is-for cash, deferred payment or other valuable consideration."

Even though there is no profit as claimed by the applicant on the supply of food to its employees, there is "supply" as provided in Section 7(1 )(a) of the GST Act, 2017.

The applicant would definitely come under the definition of "Supplier" as provided in sub-section (105) of Section 2 of the GST Act, 2017.

11. The term 'consideration' is defined in Section 2(31) of the GST Act, 2017 which is extracted below:

"'consideration' in relation to the supply of goods or services or both includes,-

a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any, other person but shall not include any subsidy given by the Central Government or a State Government;

(b) the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government:

Provided that a deposit given in respect of the supply of goods or services or-both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply.

Since the applicant recovers the cost of food from its employees, there is consideration as defined in Section 2(31) of the GST Act, 2017.


12. In the light of the aforesaid circumstances, we rule as under.


RULING

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 section 2(83) of the Act, 2017, and therefore, taxable as a supply


Senthil Nathan S IRS                     N. Thulaseedharan Pillai
Member, CGST                                Member, SGST


To
M/s. Caltech Polymers Pvt. Ltd.,
Kakkanchery,Chelembra.P.O.,
Malappuram - 673631

Last modified on Thursday, 12 April 2018 06:01

Additional Info

  • Date Range: Monday, 26 March 2018
  • Court/Authority: AAR GST State
  • Tax Type: Goods and Services Tax
  • Subject: 1
  • Petitioner/Appellant: Caltech Polymers
  • Respondent: Caltech Polymers
  • Appl no. or Appl year: ORDER No. CT/531118-C3 DATED 26/03/2018
  • Supreme Court Location: Delhi
  • AAR Location: Delhi
  • Authority: Supreme Court
  • AAR GST State Location: Kerala

Seven questions to know if you 

are paying taxes 

correctly?

If you are the CFO or the Tax Head you ought to read this. Click Here


 

Brief update on CESTAT judgements passed during June 2016 to July 2016. Please note this update is not a summary of the cases but only leads on important issues decided. The links to the judgments are also provided for the full text.

Click here for update

Central, Integrated & UT Tax Notifications,Circulars

Tax type

Notification/s

Circulars

Central Tax

21 dated 18/04/18

414243 all dated 13/04/18

Central Tax Rate

10 dt 23/03/18

 -

Integrated Tax

1/2018 dt 23/03/18

2/1/2017 dt 27/09/17

Integrated Tax Rate

No 11/2018 dt 23/03/18

 -

Union Territory Tax

06/2018 dt 31/03/18

 -

Union Territory Tax Rate

10/2018 dt 23/03/18

-

Compensation Cess None so far

1/1/2017 dt 26/07/17

Compensation Cess Rate 01/2018 dt 25/01/2018  -

 Click here for earlier GST Notifications & Circulars

Circulars under C.Ex, Customs & Service Tax


  • 24th Jan 2018 - Allahabad High Court directs Govt to extend the period to file GST Tran-1 as petitioner's application for transitional credit as  electronic GST system was not accepted on the last date i.e. 27.12.2017. As a result, the petitioner was likely to suffer loss of credit due to delay. - Continental India Private Limited  Vs UOI & Ors
  • 6th Feb 2018 - Bombay High Court passed an order against a petition filed on GST. The petitioner was unable to access GST Network. E-Way Bills are yet to come into force and without it,  petitioner was unable to move goods anywhere, paralysing its business and making it unable to comply. Though the petitioner was provided partial access after the petition was filed, they are still unable to file returns. Payment of tax was not possible without filing return. The matter was posted for another hearing on 16th February.
    The Court noted that similar grievances were raised before the Allahabad High court in Continental India Private Ltd. Vs UOI Writ (Tax) No. 67 of 2018. The Division Bench directed the respondents to reopen the portal and and entertain the application of the petitioner. - Abicor and Binzel Technoweld Pvt. Ltd. V/s UOI

Economic Survey of India 2017-18

Click here for the documents

Our Main Services 

in Indirect Taxes

 

  • Business structuring and tax planning
  • Review of end-to-end business processes for indirect taxes
  • Strategy to prevent litigation, representation and litigation support
  • Tax compliance and tax control framework
  • Support on specific issues
Go to top