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The Appellant had been providing canteen facility to its employees as mandated under the Factories Act. The Appellant used to bear part of the canteen cost and recover the balance from its employees. In respect thereto, The Appellant had sought advance ruling before the Gujarat AAR to ascertain whether GST is chargeable on recovery of such expenses from employees.
The AAR had held that GST is applicable on amount recovered from employees on account of provision of canteen services. Aggrieved, the Appellant filed an appeal before the AAAR. The AAAR observed that the Appellant is providing food facility to employees without making any profit and is working as mediator between the employees and the service provider. In view of the above, the AAAR held that GST is not applicable on amount collected by the Appellant from employees as there is no supply of goods or service by the Appellant to its employees.
Amneal Pharmaceuticals Private Limited [GUJ/GAAAR/APPEAL/2021/07
It would be pertinent to note that GST is chargeable on all supplies in the course of furtherance of business. Further, the term ‘business’ includes activities which are not for pecuniary benefit as also any activity incidental to main business. Accordingly, one may argue that the contractor was providing services to the Appellant and the Appellant was in turn providing services to its employees at concessional cost. Thus, GST could have been said to be chargeable on the amount collected by the Appellant from employees.
The information provided in this update is intended for informational purposes only and does not constitute legal opinion or advice. Readers are requested to seek formal legal advice prior to acting upon any of the information provided herein. This update is not intended to address the circumstances of any particular individual or corporate body. There can be no assurance that the judicial/ quasi judicial authorities may not take a position contrary to the views mentioned hereinrra quis.
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