In re Carraro India Private Limited (GST AAR Maharashtra)
The case concerns an application filed before the Appellate Authority for Advance Ruling, Maharashtra, seeking clarification on GST implications relating to canteen facilities provided to employees and recovery of notice pay.
The applicant is a manufacturing company operating a factory in Maharashtra with around 900 employees. Under Section 46 of the Factories Act, 1948, it is mandatory for factories employing more than 250 workers to provide canteen facilities. To comply with this statutory obligation, the applicant engaged a third-party canteen service provider. The company provides infrastructure such as space and facilities, while the vendor supplies food and staff. Employees opting for the facility are charged a fixed nominal amount of ₹500 per month through salary deductions, irrespective of actual cost, with the remaining cost borne by the employer. The facility is available only due to the employer-employee relationship and is governed by internal personnel policies.
The applicant contended that such canteen services are provided pursuant to employment contracts and should be treated as perquisites, which are excluded from GST under Schedule III. It argued that there is no intention to supply services, no commercial objective, and no quid pro quo. It also claimed that ITC should be available as the facility is mandated by law, and GST should not apply to notice pay recovery as it is penal in nature.
