No GST Deduction On Part Recovery Paid By Employee For Canteen Services: AAR
Zydus recovers a certain pre-decided percentage of the amount paid by it from the employees and the remaining balance amount is borne by the company. According to the Gujarat AAR, the company holds no liability against GST payment on the amount deducted/recovered from the employees
As per Gujarat-based authority for advance rulings (AAR) employers are not to make deduction of GST on the subsidised meal cost recovered from their employees.
The said rulings are given after Zydus Lifesciences, approached the competent authority concerning this matter. Zydus Lifesciences manufactures and distributes pharmaceutical products and is registered under the Factories Act, 1948. It is mandatory for Zydus to provide canteen facilities to its employees.
Entering into an agreement with the canteen service provider under which Zydus pays full amount to the service provider for the food served during a prescribed period on its employees’ behalf.
Zydus recovers a certain pre-decided percentage of the amount paid by it from the employees and the remaining balance amount is borne by the company.
According to the Gujarat AAR, the company holds no liability against GST payment on the amount deducted/recovered from the employees.
AAR noted that to facilitate the employees, the company is recipient of canteen service. And the GST charges have been included in the bill raised by the canteen service provider as per the contract.
ARR while ruling said that the meal cost recovered from employees’ salary would attract no levy of GST. And added, that Zydus Lifesciences clarified in a submission that it does not retain any profit margin through this activity with itself.