Recovery from employee regarding Supply of food items
to employees for a consideration in canteen run by co. is
taxable under GST
[Caltech Polymers (P.) Ltd., In re –  98 (AAAR-Kerala)]
We know that, according to schedule III, services by employee to the employer in the course of or in relation to his employment will not be considered as supply of goods or services and hence such transaction is out of the scope of GST.
Also according to schedule I, Transactions are trated as supplies even if the consideration is absent which includes supplies between related persons when such supplies are made in the course or furtherance of business. According to schedule supplies by the employer to employees would be liable to GST even though it is made without consideration. however if it is done for furtherence of business then only it is exempt.
Facts of the case:
- The applicant-company was engaged in manufacturing and sale of footwear. It was providing canteen services exclusively for the employees. It incurred the canteen running expenses for a month and recovered the same from its employees without any profit margin.
- The applicant contended that the service provided to the employees was not being carried out as a business activity and it was rendered by virtue of provisions of Factories Act, 1948 Company is recovered only the actual cost of food items consumed by the employees.
- Therefore, asssessee is of the view that this activity would not come under the scope of Supply, because company is facilitating the supply of foods to the employees, which is a statutory requirement.
Following observation were done by authority:
- According to defination of Consideration “ any payment made or to be made, whether in money or otherwise, in respect of in response to, or for the inducement of supply of goods or services or both, whether by receipient or by any other person.
- The Appellate Authority said that though in the Pre GST era,services provided in relation to serving of foods beverages by a canteen maintained in a afactory covered under the Factories Actthen it is exempted from taxable services.
- Like above no such specific exemption is given and the applicant recovers the amount from employees.
- Authority also observed that, even though company has collected the amount without any profit but the activity of suppling of food and charging the price for the same from the employees would come under the defination of supply. And recovered the cost of food items from the employees consitute consideration.
- Therefore, the supply of food items to the employees for a consideration in a canteen run by the appellant would come under the definition of 'supply' as per the GST Act. And liable for GST.