In Re Bridgestone India Pvt Ltd. (GST AAR Maharashtra)
The Maharashtra Authority for Advance Ruling (AAR) has ruled that Bridgestone India Pvt. Ltd. is liable to pay GST on the nominal amounts recovered from its employees for subsidized canteen services. However, the AAR held that the provision of free non-air-conditioned bus transportation to employees does not constitute a “supply of service” under GST. In both cases, the AAR denied the input tax credit (ITC) to Bridgestone on the GST charged by the respective third-party service providers.
Bridgestone India, a manufacturer of automobile tyres, sought clarification on the GST implications of nominal recoveries from employees for canteen services, where employees contribute a portion of the cost mandated under the Factories Act, 1948. The company also inquired whether the free bus transportation provided to employees would be considered a supply and if ITC would be available on these services.
Regarding the canteen services, the AAR followed the established precedent, stating that the nominal recovery from employees constitutes a taxable supply under Section 7 of the CGST Act, 2017. It reasoned that providing canteen services, even at subsidized rates, is an activity incidental to the business and the recovery of a portion of the cost is consideration for this supply. While the subsidized portion is a perquisite, the recovered amount is taxable. Consequently, GST is applicable on the nominal amount deducted from the employees’ salaries. The AAR also denied ITC on the GST paid to the canteen service provider, citing Section 17(5)(b) of the CGST Act, which restricts ITC on food and beverages, and the mandatory 5% GST rate without ITC for restaurant services as per Notification No. 11/2017-Central Tax (Rate).
