No GST on Salary Deductions for Canteen Services & ITC Available if Obligatory
By: Admin | September 24, 2024 | Categories: Advance Ruling-New | 4 Min Read
The Gujarat AAR, in the case of M/s Allemia India Private Limited, In Re [Ruling No. GUJ/GAAR/R/2024/17 dated July 02, 2024], ruled that deductions made from employees’ salaries for food provided at factory premises do not qualify as a “supply” under Section 7 of the CGST Act, 2017 and the GGST Act, 2017. Additionally, the applicant is entitled to Input Tax Credit (ITC) on GST charged by the canteen service provider (CSP), as per Section 17(5)(b) and relevant CBIC Circulars, but only for the cost borne by the applicant.
Facts:
M/s Allemia India Private Limited was engaged in the manufacture and sale of stainless steel pipes and had over 300 employees, requiring a canteen under the Factories Act, 1948. Employees paid a nominal fee of Rs.104/- monthly, deducted from their salaries for canteen services. The company sought a ruling on whether these deductions were subject to GST and if ITC could be claimed on the GST charged by the CSP.
Issue:
Whether GST applies to salary deductions for canteen services and whether the company can claim ITC for these services.
Held:
- No GST on Salary Deductions: The deduction of a nominal amount from employees’ salaries for food provided at the workplace does not constitute a “supply” under Section 7 of the CGST Act, 2017.
- ITC Availability: ITC is allowed for the GST charged by the CSP, but only for the portion of the cost borne by the company, as per Section 17(5)(b) of the CGST Act. ITC on food and beverages is available if it is obligatory for the employer to provide these services under the Factories Act.
This ruling aligns with prior judgments, reinforcing that no GST applies to such salary deductions when canteen services are mandatory by law, and ITC is admissible only for costs borne by the employer
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