GST to be charged on employees’ canteens in Kerala

Kerala Appellate Authority for Advance Ruling (AAAR) observed that the supply of food items in the canteens run by the appellant company will come under the definition of supply and will be taxable under the GST Act.

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Companies which are providing food facilities to their employees will now come under the Goods and Services Tax (GST) Act. Kerala Appellate Authority for Advance Ruling (AAAR) observed that the supply of food items in the canteens run by the appellant company will come under the definition of ‘supply’ and hence, will be taxable under the GST Act.

Canteens will be charged at rates similar to hotel food, that is five per cent under GST. AAAR pronounced the decision while considering a plea from Caltech Polymers in Malappuram.

The Company submitted an inquiry about whether recovering the food expenses from the employees comes under the definition of outward supplies and is taxable under the GST Act. The Company argued that providing food facility to employees is not carried out as a business activity according to the provisions of the Factory Act, 1948.

Caltech Polymers submitted a circular issued by the Central Board of Indirect Taxes and Customs, which states that tax should not be levied for services provided by employers to employees. But AAAR dismissed the argument.

According to AAAR, Caltech Polymers had admitted that it was charging employees without a profit for food in their canteen, and this will come under the definition of ‘supply’ in Section 7(1)(a) of the GST Act, 2017.

While no official statement has been given yet, the Central and state GST officials are responsible for complying with the decision as neither the High Court nor the GST tribunal has taken any decision on the case.

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