In re Alleima India Private Limited (AAR Gujarat)
In a significant ruling, the Authority for Advance Rulings (AAR) in Gujarat has provided clarity on the applicability of GST on nominal charges deducted by employers for canteen services provided to employees. The case in question, involving Alleima India Private Limited, examines whether the recovery of a nominal amount from employees’ salaries for canteen facilities constitutes a ‘supply of service’ under the CGST Act, 2017, and whether Input Tax Credit (ITC) is available for the GST paid by the company to the canteen service provider (CSP).
Background:
Alleima India Private Limited, engaged in manufacturing and selling seamless stainless steel pipes, tubes, and high resistance wires, operates a manufacturing facility in Gujarat. Employing over 300 employees, the company is mandated by the Factories Act, 1948, to provide canteen facilities. Consequently, they have engaged a CSP to prepare and supply food, deducting a nominal amount of Rs. 104 per month from each employee’s salary for this service.
Key Questions Raised:
1. Is the nominal amount deducted from employees’ salaries for canteen facilities considered a ‘supply of service’ under the CGST Act, 2017?
2. If yes, is GST applicable on this nominal amount?
3. Is ITC available to the applicant for the GST charged by the CSP?
Applicant’s Contentions:
- The applicant argued that the canteen facility, being part of the employment contract, should not be considered a supply of goods/services and hence, not subject to GST.
- The applicant cited several rulings and circulars, including Circular No. 172/04/2022-GST, which clarified that perquisites provided to employees as part of their employment contract are not subject to GST.
- The nominal amount deducted from employees’ salaries is merely a transaction in money and does not qualify as ‘consideration’ for a supply.
- The canteen facility is provided as a statutory obligation under the Factories Act, 1948, and the company does not profit from it.
AAR’s Findings:
