In re Zydus Lifesciences Ltd (GST AAR Gujarat)
Whether the subsidized deduction made by the Applicant from the employees who are availing food in the factory/corporate office would be considered as a supply by the Applicant under the provisions of Section 7 of Central Goods and Service Tax Act, 2017 and Gujarat Goods and Service Tax Act, 2017. i. In case answer to above is yes, whether GST is applicable on the amount deducted from the salaries of its employees? 2. In case answer to above is no; GST is applicable on which portion i.e. amount paid by the Applicant to the Canteen Service Provider or only on the amount recovered from the employees?
CBIC vide Circular No. 172/04/2022-GST dated 06-07-22 has issued following clarification on the issue whether GST is leviable on the benefit provided by the employer to its employees in terms of contractual agreement entered into between the employer and the employee :
Clarification
1. Schedule III to the CGST Act provides that “services by employee to the employer in the course of or in relation to his employment” will not be considered as supply of goods or services and hence GST is not applicable on services rendered by employee to employer provided they are in the course of or in relation to employment.
2. Any perquisites provided by the employer to its employees in terms of contractual agreement entered into between the employer and the employee are in lieu of the services provided by employee to the employer in relation to his employment. It follows therefrom that perquisites provided by the employer to the employee in terms of contractual agreement entered into between the employer and the employee, will not be subjected to GST when the same are provided in terms of the contract between the employer and employee.
The Provision of Services of transports and canteen facility to its employees is as per the contractual agreement between the employee and the employer in relation to the employment. As cited in the above referred provisions of scheduled III and the clarification issued vide Circular No. 172/04/2022-GST dated 06-07-22 , the provision of the services of transportation and canteen facility cannot be considered as supply of goods or services and hence cannot be subjected to GST.
We have already discussed in above paras that the applicant is not liable to pay GST on the amount deducted/ recovered from the employees. Further the applicant is recipient of canteen service to facilitate the employees and Canteen Service Provider raised the Bill of canteen charges inclusive of GST as per the contract. The applicant collects/ recoveres the partial amount from the employees and is required to pay the gross amount inclusive of GST to the canteen service by adding residual amount in the employees’ portion and is required to pay gross amount of Bill inclusive GST to the Canteen Service Provider.
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, GUJARAT
Brief facts:
M/s. Zydus Lifesciences Ltd. (Formerly known as Cadila Healthcare Ltd.), hereinafter referred to as M/s Zydus for the sake of brevity, is engaged in manufacture, supply and distribution of various pharmaceutical products. M/s Zydus is having 1200 (approx.) employees in their factory and registered under the provisions of the Factories Act, 1948′. M/s Zydus is required to comply with all the obligations and responsibilities cast under the provisions of the Factories Act. The summary of the type of employees and the nature of recovery of subsidized value is tabulated as follows:
Meals:
