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The Applicant had sought advance ruling to ascertain whether GST would be applicable on the amount recovered from its employees or contractual workers, towards third-party canteen services and whether ITC would be available on food bills.
In light of Circular No. 172/04/2022-GST dated July 6, 2022, the AAR observed that the core requirements provided by an employer to an employee pursuant to a contractual agreement are not subject to GST under Entry I of Schedule III of the CGST Act. Accordingly, canteen facilities for the Applicant's own employees are not subject to GST, even if the Applicant recovers a part of the amount for the same.
As regards the contractual employees, the AAR ruled that they cannot be considered as ‘employees’ as it is the Contractor who bears the cost of salary and wages. Accordingly, in absence of employer-employee relationship, Schedule III would not be applicable and therefore, GST on such services would be exigible.
As regards the ITC on food bills, it was observed that since it is obligatory for Applicant to provide canteen facility under Factories Act, the ITC on GST paid on canteen facility is admissible on food bills provided that the GST burden has not been passed on to the employees.
Troikaa Pharmaceuticals Limited [2022-TIOL-106-AAR-GST]
It would be pertinent to note that contractual worker are also included in the definition of the term ‘worker’ under Factories Act. Therefore, the proviso u/s. 17(5) of the CGST Act which inter alia allows ITC where it is obligatory for the employer to provide canteen services to the workers, should also be extended to the contractual workers.
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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