In re Ferrero India Pvt. Ltd. (GST AAR Maharashtra)
The Maharashtra Authority for Advance Ruling (AAR) has ruled that Ferrero India Pvt. Ltd. is liable to pay Goods and Services Tax (GST) on the amounts recovered from its employees for providing subsidized canteen and bus transportation services. However, the AAR clarified that notice pay recoveries from employees who do not serve the agreed notice period are not taxable under GST.
Ferrero India, a manufacturer of chocolate and confectionary products, sought a ruling on the GST applicability of recoveries made from employees for canteen and transportation services, provided through third-party vendors to comply with the Factories Act, 1948, and as per a long-term wage settlement agreement. The company also sought clarification on the taxability of notice pay recoveries.
The AAR, following the rationale established in similar previous rulings, determined that the amounts recovered from employees for both canteen and transportation services constitute a taxable supply under Section 7(1) of the CGST Act, 2017. It reiterated that providing these services, even at subsidized rates, is an activity incidental or ancillary to the company’s main business of manufacturing and selling confectionary products and thus falls under the definition of “business” under Section 2(17) of the CGST Act. The AAR emphasized that there are two distinct supplies: one from the third-party provider to Ferrero India, and another from Ferrero India to its employees, with the salary deductions acting as consideration for the latter. While the subsidized portion borne by the company might be considered a non-taxable perquisite, the amount recovered from employees is subject to GST.
