GST Alert from Gujarat Authority for Advance Rulings (AAR)

Case of Dormer Tools India P. Ltd. Advance Ruling No. Guj/GAAR/R/2024/12, Application No. Advance Ruling/SGST&CGST/2023/AR/28 dated 30^th May, 2024.

The Authority for Advance Rulings (AAR), Gujarat held that nominal salary deductions for canteen facilities in factory premises are not a supply, GST is not applicable on such deduction and also allowed input tax credit for costs borne by assessee/applicant for permanent employee’s canteen services under Factories Act.

In the present case, the following are the findings of AAR:

1. That the deduction of nominal amount made by the applicant from the salary of the employees who are availing the facility of food provided in the factory premises would not be considered as a ‘Supply’ under the provisions of Section 7 of CGST Act, 2017.
2. Input Tax Credit (ITC) will be available to the applicant on GST charged by the service provider in respect of the canteen facility provided to its employees working in their factory. This is in view of the provisions of section 17(5)(b) as amended effective from 1.2.2019 and clarification issued by CBIC vide circular No. 172/04/2022-GST dated 6.7.2022 read with provisions of section 46 of the Factories Act, 1948 and read with provisions of Gujarat Factory Rules, 1963. ITC on the above is restricted to the extent of the cost borne by the applicant for providing canteen services to its permanent employees, but disallowing proportionate credit to the extent embedded in the cost of goods recovered from such employees.