Perquisites provided by the 'employer' to the 'employee' in terms of contractual agreement entered into between them, will not be subjected to GST

M/s. AIA Engineering Limited [AAR, Gujarat]

Facts: The applicant has filed this application for advance ruling in relation with the following questions:

• Whether GST is applicable on the amount representing the employee's portion of canteen charges recovered/collected by the applicant from its employees and paid to the canteen service provider on behalf of the employee.
• Whether the Company is eligible to take the ITC for the GST charged by the canteen service provider for the canteen services for its employees where the canteen facility is mandatory in terms of section 46 of the Factories Act. 1948.

Held: In terms of Circular No. 172/04/2022-GST, it is clarified that perquisites provided by the 'employer' to the 'employee' in terms of contractual agreement entered into between the employer and the employee, will not be subjected to GST when the same are provided in terms of the contract between the employer and employee. Thus, the subsidized deduction made by the applicant from the employees who are availing food in the factory would not be considered as a 'supply; under the provisions of section 7 of the CGST Act, 2017.

Further, ITC will be available to the appellant in respect of food and beverages as canteen facility is obligatorily to be provided under the Factories Act, 1948, read with Gujarat Factories Rules, 1963 as far as provision of canteen service for full time/direct employees working on permanent basis at the factory is concerned. It is further held that the ITC on GST charged by the canteen service provider will be restricted to the extent of cost borne by the appellant only.