Supply includes all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business.
Schedule-I: Activities to be treated as supply even if made without consideration
Supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business.
Schedule-III: Activities or transactions which shall be treated neither as a supply of goods nor a supply of services
Services by an employee to the employer in the course of or in relation to his employment. However, services provided outside the ambit of employment for a consideration would qualify as supply.
Some important Facts
Company provide canteen facility to its employees as per Factories Act, 1948. Section 46 stipulates that any factory employing more than 250 workers is required to provide canteen facility to its employees. Since this is mandatory, ITC of canteen services provided to employees should be available in view of proviso to section 17(5)(h) of CGST Act. This clause is inserted vide CGST (Amendments) Act, 2018 w.e.f. 01-02-2019.
On the other side, if Company recover some amount from employees for such services. Therefore, it become a part of supply & assesse is liable for tax payment.
Clarification: As per Schedule-III, services by an employee to the employer in course of or in relation to his employment is neither supply of services nor supply of goods. However, In the above case, service is provided by employer not by employee & also it is outside the ambit of employment. Therefore, such transaction is not covered under schedule III & It shall be treated as supply.
Note: Taxable value for the purpose of GST is open market value of such services.
In simple words, company is providing services to employees for a consideration in the course or furtherance of business and it fall under the definition of supply. Therefore, it will create tax liability on the company.
For the purpose of ITC, section 17(5)(h) of CGST (Amendments) Act, 2018, company is eligible for taking ITC on inputs used for providing such canteen services.
Alternatively, Company can pay GST @5% on canteen services without taking ITC on inputs of such services. However, this rate is under dispute. Therefore, it is advisable to charge GST @18% & take ITC on inputs.