Recovery of food expenses from employees for the canteen provided by company comes under the definition of outward supplies are taxable under GST Act*
In this matter the applicant is a Private Limited Company engaged in the manufacture and sale of footwear. It is submitted that they are providing canteen services exclusively for their employees. They are incurring the canteen running expenses and are recovering the same from its employees without any profit margin.
The question before the Authority for Advance Ruling was as under:
"Whether reimbursement of food expenses from employees for the canteen provided by company comes under the definition of outward supplies as taxable under GST Act.”
For deciding this issue Authority considered the definition of terms business and consideration as under:
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 incidental or ancillary to sub-clause (a); ...”
From the plain 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.
The term 'consideration' is defined in Section 2(31) of the GST Act, 2017 which is extracted below:
“consideration' in relation to the supply of goods or services or both includes,-
a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government;
(b) the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government:
Provided that a deposit given in respect of the supply of goods or services or-both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply.
Since the applicant recovers the cost of food from its employees, there is consideration as defined in Section 2(31) of the GST Act, 2017
Authority also considered the provisions of Schedule-II of GST Act which specifies the activities to be considered supply of goods or services. As per clause 6 of the Schedule, the following composite supply is declared as supply of service:
"supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply of service is for cash, deferred payment or other valuable consideration."
Having considered all the above provisions , Authority decided that recovery of food expenses from employees for the canteen provided by company comes under the definition of outward supplies are taxable under GST Act.
* Decided by AUTHORITY FOR ADVANCE RULING – KERALA in the matter of Caltech Polymers Pvt. Ltd