Brandix Apparel India sought clarification from the GST Authority for Advance Ruling (AAR) Andhra Pradesh concerning the canteen facility provided to employees, managed by a third-party service provider. The provider charged Rs 1,538.25 per employee per month, with Rs 578 collected from employees by the applicant.
The applicant argued this was in compliance with the Factories Act, 1948, which mandates canteen facilities for a workforce exceeding 250. The applicant, engaged in apparel manufacture, contended that it didn’t directly provide canteen services to employees; the third-party did.
Referring to Section 7 of the CGST Act, the applicant argued that as it was not in the business of providing canteen services, the employee recoveries weren’t a supply. The GST Policy Wing Circular stated that perquisites provided by employers to employees, in lieu of services, aren’t subject to GST. Given the mandatory nature of the canteen facility under the Factories Act, it was asserted that even in the employee-employer transaction, GST wasn’t applicable.
The AAR ruled in favour of the applicant, stating that GST was not liable on recoveries from employees for canteen services.
Another issue involving AAR was that of transportation services provided to employees by a third-party. The service provider charged Rs 2,277 per employee per month, with the applicant recovering Rs 350 and bearing Rs 1927. The applicant argued that, being in the apparel manufacturing business, it wasn’t engaged in bus transportation. It was contended that the recoveries from employees for transportation services didn’t constitute a supply under Section 7, as the applicant was not the supplier but the receiver. The AAR concurred, stating that GST was not applicable for recoveries from employees for transportation services.
