GST Exemption for Notice Pay Deduction and Limited ITC for Canteen Facilities to the extend of cost borne by the assessee

Last updated: 10 October 2023

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The Gujarat Authority for Advance Ruling (AAR) has ruled that deductions from employee salaries for canteen facilities and notice pay are not subject to GST. While Input Tax Credit (ITC) is available for GST charged by canteen service providers, it is limited to the extent of the cost borne by the employer. The ruling also clarifies that GST is not applicable on salary deductions made in lieu of an employee not serving their notice period, viewing it as compensation for a breach of contract.

Court :
AAR, Gujarat

Brief :
The AAR, Gujarat, in the case of M/s. Tata AutoComp Systems Ltd[Ruling No. GUJ/GAANW2O23/23 dated June 19, 2023], held that deductions from employees' salaries for availing canteen facilities, transportation services provided to the employees and notice pay are not considered taxable under GST, and Input Tax Credit ("ITC”) can be claimed on GST charged by service providers, with restrictions based on the cost borne by the employer.

Citation :
Ruling No. GUJ/GAANW2O23/23 dated June 19, 2023

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Judgement posted by

Bimal Jain

Service

FCA, FCS LLB with21 Yrs of Experience inTaxation Indirect and Direct: Education Qualification: B.Com (Hons) Chartered Accountants Company Secretary LLB Qualified SAP FI/CO Consultants Professional Membership: Chairmanof Indirect Tax Committee of PHD Chamber of Commerce Member of Indirec ... Read more

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