No Goods and Services Tax (GST) will be levied on the amount paid by the employees for the canteen facility. The Authority for Advance Ruling (AAR) has given this arrangement. Tata Motors had approached the Gujarat Bench of AAR seeking information whether GST would be levied on the nominal amount collected by its employees for the use of canteen facility from them.
Apart from this, the company had also asked whether the facility of Input Tax Credit (ITC) will be available on GST charged by the service provider on the canteen facility provided to the workers working in the factory.
The AAR in its judgment has said that Tata Motors has arranged for canteen for its employees, which is being operated by a third party service provider. Under this arrangement, a part of the canteen fee is borne by the company and the rest is borne by the employees.
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The canteen fee for the employees’ share is collected by the company and passed on to the canteen service provider. Apart from this, Tata Motors has also said that it does not maintain its profit margin in collecting canteen fee from the employees.
The Authority for Advance Ruling stated that ITC for payment of GST on canteen facility is a restricted credit under the GST law and the applicant cannot avail the same. AMRG & Associates Senior Partner Rajat Mohan said that at present, companies providing subsidized food items are charging five per cent tax on its recovery from the employees.
In the next meeting of the GST Council, the focus will be on reduction of exemptions and removal of irregularities.
The AAR has now provided that where a major part of the canteen fee will be borne by the employer and only a nominal fee will be charged from the employees, there will be no GST (Goods and Services Tax).
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