In re Shriram Pistons And Rings Limited (GST AAR Uttar Pradesh)
The ruling addresses the question of whether providing subsidized food to employees falls within the scope of supply, consideration, and GST applicability. It also examines the eligibility of input tax credit on canteen charges.
The AAR considers the arrangement made by Shriram Pistons And Rings Limited, wherein a portion of the canteen charges is borne by the company, and the remaining portion is borne by its employees. The company collects the employees’ portion and pays it to the canteen service provider. The AAR examines whether GST is applicable on the amount deducted from the employees’ salaries and the eligibility of input tax credit (ITC) on canteen charges.
The AAR refers to Schedule III of the CGST Act, which states that services provided by an employee to the employer in the course of or in relation to employment are not considered as supplies. It concludes that the subsidized deduction made by the company from the employees’ salaries for availing food in the factory/corporate office does not qualify as a supply under Section 7 of the CGST Act.
Regarding the consideration of ‘supply of service,’ the AAR determines that the subsidized deduction made from employees’ salaries cannot be considered as consideration for supply of service by the company in furtherance of its business.
The AAR also examines the eligibility of input tax credit (ITC) on canteen charges. It refers to Section 17(5)(b) of the CGST Act, which allows ITC on goods or services when it is obligatory for an employer to provide such benefits to its employees under any law. The AAR concludes that ITC on GST paid for the canteen facility is available to Shriram Pistons And Rings Limited, provided the burden of GST has not been passed on to the employees.
Conclusion: Based on the analysis and the GST AAR ruling, the following conclusions are made:
