In re SRF Limited (GST AAR Gujrat)
Whether GST would be payable on nominal & subsidized recoveries made by the Applicant from its employees towards (i) Provision of canteen facility by 3rd party service provider to Applicant’s employees at Applicant’s premises. (ii) Provision of bus transportation facility by 3rd party service provider to Applicant’s employees and 2. If the answer to any of the question above is yes, what is the applicable rate of GST thereupon?
We observe that the applicant is providing transport and canteen facility to its permanent employees (on payroll) as per contractual agreement between employer-employee relationships.
We find that CBIC vide Circular No. 172/04/2022-GST dated 06-07-22 has issued following clarification on the issue whether GST is leviable on the benefit provided by the employer to its employees in terms of contractual agreement entered into between the employer and the employee:
Clarification
1. Schedule III to the CGST Act provides that “services by employee to the employer in the course of or in relation to his employment” will not be considered as supply of goods or services and hence GST is not applicable on services rendered by employee to employer provided they are in the course of or in relation to employment.
2. Any perquisites provided by the employer to its employees in terms of contractual agreement entered into between the employer and the employee are in lieu of the services provided by employee to the employer in relation to his employment. It follows therefrom that perquisites provided by the employer to the employee in terms of contractual agreement entered into between the employer and the employee, will not be subjected to GST when the same are provided in terms of the contract between the employer and employee.
The Provision of Services of transports and canteen facility to its employees is as per the contractual agreement between the employee and the employer in relation to the employment. As cited in the above referred provisions of scheduled III and the clarification issued vide Circular No. 172/04/2022-GST dated 06-07-22, the provision of the services of transportation and canteen facility cannot be considered as supply of goods or services and hence cannot be subjected to GST.
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, GUJARAT
M/s SRF Limited, hereinafter referred to as “the applicant” for the sake of brevity, is a multi-business chemicals conglomerate engaged in the manufacturing of industrial and specialty intermediates. The applicant business portfolio covers fluorochemicals, specialty chemicals, packaging films, technical textiles, coated and laminated fabricsit.
1.1 The applicant has submitted that it provides canteen facilities to the employees of the company, the applicant has entered into contract with 3rd party service vendor, i.e., M/s Shashi Catering Services Private Limited (hereinafter referred to as ‘the caterers). Relevant extract of the Agreement dated 01 August 2020 between the Applicant and M/s Shashi Catering Services Pvt. Ltd. (“Agreement dated 01 August 2020”) is re-produced verbatim as under —
“1. SCOPE OF SERVICE
SRF hereby appoints the Service Provider .for providing Industrial catering food & beverage services as mentioned here!n and as per the terms and conditions and the Scope of Work (“SOW’) more particularly describe Schedule I for the location/s listed in Schedule 2 (“Site’) on an exclu (“Services’) for the Term (as defined below) and the Service Provider hereby agrees to provide the services as per the minimum service levels, being the minimum acceptable levels of performance of the services by the Service Provider during the Term of Agreement as provided in Schedule 3 (“Minimum service levels/ MSLs’) in accordance with the terms of this Agreement. Both the parties agree that as and when services are desired by SRF, the services will be added to the current SOW by way of an additional SOW along with the relevant terms and conditions of such additional services. In the event of a conflict between the terms and conditions of this Agreement and Statement of .Work (“SOW”), the provisions of the Agreement shall prevail. The Service Provider willingly undertakes and accepts the service and assures SFR that they will perform the services at all stages in according to the agreed MSLs.
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4. SERVICES FEES
In consideration of the services to be provided by the Service Provider, SRF will pay the Service Provider a fee as detailed under Schedule 4 (“Service Fees’) and the reimbursement of the bills pertaining to rendering of the services. All payments made to the Service Provider shall be inclusive of all applicable taxes. SRF shall pay the undisputed Service Fees within 60 days from date of receipt of invoice from the Service Provider. All direct or indirect taxes, duties, levies, royalties, etc. with regard to this Agreement shall be paid by Service Provider. In the vent of any dispute, the same shall be communicated to the Service Provider within seven (7) working days from the date of receipt of invoice by SRF. SRF will ensure the payment of bills to be made/ reimbursed in the same month; in case of any delay in payment, the Service provider is not authorized to charge any amount in form of interest, fee or supplementary charges.
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Schedule 1
Scope of Work
Service Provider’s Oblikation
Note: – These rates are fixed for 2 years and 3rd year rates to be revised as per Food Article inflation index and manpower MWDA rise mutually.
Go Live Date: 01 Sept 2020
Contract term: 01 Sept 2020 to 31st Aug 2023 (3 years)
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Scope of Services
1. The Service Provider shall provide service at site address and the service will include meals at agreed rate mentioned The service will be provided to employees, visitor, etc. at site address.
2. In addition to routines, services, the service provider shall be responsible for provision of certain catering services for specific events as per mutually agreed rates per event.
3. The Service Provider shall strictly adhere to laid down meals timings in schedule while providing the services.
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Schedule 2
Sites
