In re Thyssenkrupp Industries India Pvt. Ltd. (GST AAR Maharashtra)
The Authority for Advance Ruling (AAR), Maharashtra examined whether GST is applicable on recoveries made by an employer from employees towards canteen facilities, bus transportation services, and notice pay deductions. The applicant, a company engaged in manufacturing and engineering services, provides canteen and transportation facilities to employees through third-party service providers and recovers part of the cost from employees.
The AAR analysed the scope of “supply” under Section 7 of the CGST Act, which requires the existence of goods or services, consideration, and that the activity be in the course or furtherance of business. It also examined the definition of “business” under Section 2(17), which includes activities incidental or ancillary to the main business. The authority held that providing canteen and transportation facilities to employees is incidental and ancillary to the principal business, as such services support employees who are essential to business operations. Therefore, these activities fall within the scope of “business.”
The AAR observed that there are two distinct transactions: first, the supply of services by third-party vendors to the employer; and second, the supply of such services by the employer to employees. Since the employer collects consideration, albeit at subsidized rates, from employees, the essential elements of “supply” are satisfied. Accordingly, the recoveries made from employees towards canteen and transportation services constitute taxable supplies under GST.
