Kerala-based Caltech Polymers had approached the AAAR against a ruling given by the Authority for Advance Rulings (AAR) stating that it provides canteen services exclusively for its employees, and incurs canteen running expenses for a month and recovers the same from its employees without any profit margin.
It also said the service provided to the employees is not being carried out as a business activity, and is according to the provisions in the Factories Act, 1948 — Section 46 stipulates that any factory employing more than 250 workers is required to provide canteen facility to its employees.
A government statement dated July 10, 2017, had clarified that any supply made by the employer to its employee in terms of contractual agreement entered into between them, would not be subjected to GST. So, where the food/ lunch facility is common to all employees, it may be argued that such facility is akin to provision of facilities/ utilities such as laptops, water, desk etc. which are uniformly provided to all the employees during the course of employment and therefore, GST should not be applicable on the same.
However, the Appellate Authority said the supply of food items to the employees for consideration in the canteen run by the appellant company would come under the definition of ‘supply’ and would be taxable under GST. Accordingly, it dismissed the appeal.
In fact, when arguing the case the company had said the space for the canteen is provided by the company, inside the factory premises, the cook is employed by the company and is paid monthly salary and vegetables and other items required for preparing the food items are purchased by the company directly from the suppliers, beside others. It argued that these activities do not fall within the scope of ‘supply’, as the same is not in the course or furtherance of its business.
Such rulings help the taxpayer by giving an advance decision in relation to the supply of goods and/or services proposed to be undertaken or being undertaken by the assessee. The decision is binding on the applicant and the jurisdictional tax authority. Though such a decision does not have precedent value like that of a High Court or Supreme Court judgment, it can be used as persuasive tool in future cases.
Source: The Hindu
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