GST credit on canteen expenses and levy of GST on recovery of such expenses from employees.
Facts of the Case
There has been a case before the AAR of Gujarat on the admissibility of GST credit on canteen expenses and levy of GST on recovery of canteen expense from employees.
The applicant had a factory and mandatorily to serve meals to their employees (under Factory’s Law). The canteen facility is a cost to the Company and covers under employment terms with the employees. Those terms also contained that employee shall bear a nominal amount of the canteen expense which shall be deductible from their salary.
Ruling by the Authority
According to the authority, GST on nominal recovery from employees of canteen expenses will not attract levy of GST.
However, on another question before the authority, authority ruled that GST credit will not be admissible on canteen services availed
by the employer in its factory, even if such services were mandatory to be given to employees according to any other law in force.
Our View
GST on recovery has always been a point of discussion. One must consider the relevant aspect of the transactions before adopting any view because various authorities are asking taxpayers to pay GST.
The admissibility of GST credit of canteen expenses incurred by an employer in its factory, may lead to litigation considering current provisions of the law.
