In re Cadila Pharmaceuticals Ltd (GST AAR Gujarat)
1. 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’ under the provisions of section 7 of the CGST Act, 2017 and the GGST Act, 2017?
The subsidized deduction made by the applicant from the employees who are availing food in the factory/corporate office would not be considered as a ‘supply’ under the provisions of section 7 of the CGST Act, 2017 and the GGST Act, 2017.
2. If yes, whether GST is applicable on the amount deducted from the salaries of its employees and on what portion GST will be applicable ie amount paid by the applicant to the canteen service provider or only on the amount recovered from the employees?
Since the answer to the above is not in the affirmative, the ruling sought in respect of the second and the third question is rendered infructuous.
3. Whether ITC of GST charged by the canteen service provider would be eligible for availment to the applicant?
Input Tax Credit (ITC) will be available to the applicant on GST charged by the service provider in respect of canteen facility provided to its direct employees working in their factory and the corporate office, in view of the provisions of Section 17(5)(b) as amended effective from 1.2.2019 and clarification issued by CBIC vide Circular No. 172/04/2022-GST read with provisions of section 46 of the Factories Act, 1948 and read with provisions of Gujarat Factory Rules, 1963 and Gujarat Shops and Establishment (Regulation of Employment and Condition of Service) Act, 2019. ITC on the above is restricted to the extent of the cost borne by the applicant for providing canteen services to its direct employees, but disallowing proportionate credit to the extent embedded in the cost of goods recovered from such employees.
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, GUJARAT
Brief facts:
M/s. Cadila Pharmaceuticals Ltd, Plot No. 1389, Trasad Road, Dholka, Ahmedabad, Gujarat 382 225 [for short-‘applicant’] is registered under GST and their GSTIN is 24AAACC6251E1Z5.
2. The applicant is engaged in the business of manufacture, supply and distribution of various pharmaceutical products. The applicant has employed around 2745 full time permanent employees in their factory and corporate office. They are also registered under the Factories Act, 1948.
3. The applicant provides canteen facility to its employees at the factory and its corporate office. The reasons provided by the applicant for providing the aforementioned facility is that in terms of section 46 of the Factories Act, 1948, they are mandated to provide and maintain canteen for the use of its employees.
4. Since the factory premises is located far away from the city limits, the applicant provides canteen facility by appointing a canteen service provider [ for short – CSP]. The employees are issued an ID card while joining which can be used to avail this canteen facility. They are charged only for the days on which an employee has punched his ID card and a pre-determined percentage is deducted from the salary payable to the respective employee. The facility is tabulated below for ease of reference:
