Perquisites provided by the employer to the employee under the contractual agreement would not be considered as Supply under GST

Last updated: 21 March 2024

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The Gujarat AAR has ruled that employer contributions towards mandatory canteen facilities, as required by the Factories Act, are not considered a 'supply' for GST purposes. This means GST will not apply to the portion of canteen costs borne by employees. The ruling also confirms that employers can claim Input Tax Credit (ITC) on canteen services provided to employees under the Act.

Court :
Gujarat AAR

Brief :
The Gujarat AAR in the matter of Kohler India Corporation (P.) Ltd., In re [Advance Ruling No. GUJ/GAAR/R/2024/03 dated January 05, 2024], held that where the Applicant under the Factories Act, 1948 ("the Factories Act") entered into a contract with the canteen service provider ("CSP") to provide canteen facilities to workers, then the deductions made by the Applicant from the employees availing food in the factory would not be considered as a 'supply'. Thus, the GST would not apply to the employee's portion. Further, an Input Tax Credit ("ITC") will be available to the Applicant with respect to food and beverages as the canteen facility is obligated under the Factories Act.

Citation :
Advance Ruling No. GUJ/GAAR/R/2024/03 dated January 05, 2024

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Judgement posted by

Bimal Jain

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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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