Is GST applicable on canteen and transport recoveries from Employees?
In an AAR in the case of M/s Ferrero India Pvt. Ltd. (Case No. GST-ARA-62/21-22/24-25/B-172 dated 27-03-2025) the question raised were whether GST is applicable on canteen and transport recoveries from employees? Is GST applicable on notice pay recoveries?
Let us have a Short Overview of the AAR:
Ferrero India provided subsidised canteen and bus services to the employees. Services are part of employment terms and are not for profit.
Costs were partially recovered by a salary deduction. No commercial intent behind such recoveries. The services are mandatory under the factories act and the services are offered via third-party vendors.
Issues:
Is GST applicable on canteen and transport recoveries from employees?
Is GST applicable on notice pay recoveries?
AAR Findings:
Amount recovered from employees with respect to canteen and bus services are subject to GST since it is covered under ‘supply of services’ as per section 7(1)(a) of CGST Act. Even if the applicant does not profit from these services, the recovery of cost itself constitutes as a consideration.
Forfeiture of salary or payment of amount as per the employment bond for leaving the employment before the minimum agreed period is not a consideration for tolerating an act or situation and hence it would not constitute as supply – clarified as per Circular No. 178/10/2022-GST dated 03-08-2022. Hence no GST applicable on notice pay recoveries.
Conclusion:
Recovery from Employee for canteen & transport is taxable whereas the recovery of Notice pay remains exempt!
The copy of the order is as under:
