Goods and Services Tax – GST – By: – Sanjeev Singhal – Dated:- 19-4-2018 Last Replied Date:- 19-4-2018 – Fact of the Advance Ruling Case : Advance Ruling U/S 98 of the GST Act- whether recovery of food expenses from employees for the canteen provided by company comes under the definition of outward supplies are taxable under GST Act – Orders issued. Read:-Application dated 30.12.2017 from Caltech Polymers Pvt. Ltd. ORDER No.CT/531118-C3 DATED 26/03/2018 = 2018 (4) TMI 582 – AUTHORITY FOR ADVANCE RULING – KERALA Fact : 1. M/s. Caltech Polymers Pvt. Ltd., Malappuram in Kerala (hereinafter called the applicant or the Company) has preferred an application for Advance Ruling on whether recovery of food expenses from employees for the canteen service provided by the applicant company comes under the definition of outward supplies and are taxable under Goods & Service Tax Act. 2. They are incurring the canteen running expenses and are recovering the same from its employees without any pr
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the Authority for Advance Ruling. Whether reimbursement of food expenses from employees for the canteen provided by company comes under the definition of outward supplies under GST Act. 7. The term business is defined in Section 2(17) of the GST Act, which reads like this:- business includes:- (a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit: (b) any activity or transaction in connection with or incidents or ancillary to sub-clause (a); from the plane reading of the definition of business , it can be safely concluded that the supply of food by the applicant to its employees would definitely come under clause (b) of Section 2(17) as a transaction incidental or ancillary to the main business. 8. Schedule II to the CGST Act, 2017 describes the activities to be treated as supply of goods or supply of services. As per clause 6 of the Schedule, the following composite supply is declared as
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; as defined in Section 2(83) of the Act, 2017, and therefore, taxable as a supply of services under GST. Though the above ruling will be applicable on the Company who has applied for this advance ruling but become benchmark for the others as well. From the above cited ruling, it is clear that if the food expenses would not have been charged from the employees, it is not subject to GST. Because charging from employees is main factor. But, as per clause -2 of the Schedule-1 of the CGST Act,2017 , if the goods or services are supplied without consideration to the related person or distinct person [Here, in the above case, the employer and employee is related person as defined in Explanation to Section-15 of the CGST Act,2017], even though the same shall be treated as supply. Therefore, this transaction is otherwise taxable also. Now looking at the above judgment of the AAR , there are number of questions those have been left answered . What is cost of Food on which GST shall be levied. S
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anation to Section-15 of the CGST Act,2017 . Therefore, Section 15 of CGST will be apply and accordingly cost of the food shall be determined as per Rule 28 and 30 of the CGST Rules, 2017. If the food has been outsourced and supplied to employee the cost charged to employee shall be as per rule 28 and 30 of the CGST rules as the employer and employee is related person. ITC on the above service shall be disallowed u/s 17[5] explicitly in both the cases of own canteen or outsourced. But as in the above case providing food was statutory requirement as per Factory Act ,1948, ITC on the inward services shall be allowed. Whether GST will be charged from the employees, the answer is yes as provided in Section-15[2][a] of the CGST Act,2017. Whether the Company need to raise invoice on employee and make the payment of GST. The answer is Yes as per section 31[2] of the CGST Act,2017. ______________ Author is practicing chartered accountant in Gurugram[ Haryana] and having practice in Goods and S
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