The Gujarat Authority for Advance Rulings (AAR) has ruled that deducting money from employees’ salaries to pay a canteen services provider (CSP) would not attract the Goods and Services Tax (GST). In the case of the luxury kitchen and bath fixtures brand Kohler India Corporation, the AAR ruled that input tax credit (ITC) would be given to the company for GST paid on payment to a CSP for non-contractual employees. The ITC is restricted to the extent of the cost borne by the applicant for providing canteen services to its employees.
As per Factories Act, of 1948, the company must provide canteen facilities where more than a specified number of workers are employed. The applicant entered into a contract with a CSP to provide canteen facilities to its workers. The employees’ portion of canteen charges is collected from their salaries and paid to the CSP by the company on their behalf. The AAR ruled that ITC for GST on canteen services is obligatory under the Factories Act and there is no GST on employee’s payment for canteen service.