GST AAAR Rajasthan Remands Case for New Ruling on Canteen Subsidies

In re Federal-Mogul Ignition Products India Limited (GST AAAR Rajasthan)

The AAAR held that the Authority for Advance Ruling, Rajasthan has erred in not pronouncing the Ruling on Merits. The Ruling of AAR, Rajasthan dated 18.10.2022 is set aside and the matter is remanded back to the AAR to decide the application afresh on merits after considering all the questions posed by the appellant in their application dated 11.03.2022.

The case “In re Federal-Mogul Ignition Products India Limited (GST AAAR Rajasthan)” sheds light on the intricate aspects of GST applicability on subsidized deductions for employee meals and input tax credit (ITC) eligibility. This analysis delves into the ruling to understand the implications for businesses providing canteen facilities to their employees.

Detailed Analysis

The appellant, Federal-Mogul Ignition Products India Limited, sought clarity from the Authority for Advance Ruling (AAR), Rajasthan, on whether the subsidized deductions from employees availing canteen services constitute a “supply” under GST laws. The key questions raised included:

1. GST Applicability on Nominal Deductions: Whether GST applies to the nominal amounts deducted from employees’ salaries for availing canteen services.
2. GST on Contractual Employee Deductions: Whether GST is applicable on amounts deducted from contractors for canteen services provided to contractual employees.
3. Input Tax Credit Eligibility: Whether ITC is available for the GST charged by the canteen service provider.

The appellant contracted M/s Punjabi Flavourz Catering Service to operate the canteen within the factory premises, deducting part of the meal costs from employees’ salaries and contractors. The appellant has been paying GST on these recoveries since July 2017.