Employee Canteen Recovery Not Supply; ITC Allowed to Employer: AAR Gujarat

In re Torrent Pharmaceuticals Ltd. (GST AAR Gujarat)

Summary: Gujarat Authority for Advance Ruling held that amounts recovered by Torrent Pharmaceuticals Ltd. from employees towards subsidised canteen facilities at its Indrad plant, R&D facility and corporate office would not constitute a “supply” under Section 7 of the CGST Act, 2017, and consequently GST is not payable on such employee recoveries. The applicant employed more than 250 employees at its Indrad plant and R&D facility and more than 100 employees at its corporate office. Canteen facilities were provided pursuant to statutory obligations under Section 46 of the Factories Act, 1948 and Section 23 of the Gujarat Shops and Establishment (Regulation of Employment and Condition of Service) Act, 2019. Referring to Circular No. 172/04/2022-GST dated 06.07.2022, the AAR held that deductions from employees availing food at these locations would not be treated as taxable supplies. On ITC, the Authority applied the proviso to Section 17(5)(b) of the CGST Act and held that ITC of GST charged by the canteen service provider is available because provision of the canteen facility is obligatory under applicable law. However, ITC is restricted to the extent of the canteen cost actually borne by the applicant, with proportionate credit attributable to amounts recovered from employees being disallowed.