No GST On Canteen Fees, Notice Period Pay: AAR Order

The notice pay is a “safety valve”, said the AAR bench. It is given not as a consideration. The employee is the service provider, giving services during the employment which are excluded from the definition of supply under GST laws. The AAR bench noted that as a result notice pay does not result in the provision of service by either party. Hence, no GST will apply to it. In case employees lose ID cards, another card is issued in exchange for a fee. However, mostly the cards are printed in-house by companies. This will also not fall under purview of GST after AAR’s ruling

There be will no goods and services tax (GST) on transactions entered into by a company with its employees. The Haryana bench of the GST Authority of Advance Rulings (AAR) passing the order stated that such orders would not be considered as “supply” at thus will no longer attract any GST, reported a media house.

Transactions such as recovery of notice pay, recovery of the bond amount, deduction of salary for canteen facilities or issue of duplicate ID card, will form part of such transaction.

The AAR bench made the announcement followed by the clarifications issued by the Central Board of Indirect Taxes and Customs (CBIC) in August this year.

The notice pay is a “safety valve”, said the AAR bench. It is given not as a consideration. The employee is the service provider, giving services during the employment which are excluded from the definition of supply under GST laws. The AAR bench noted that as a result notice pay does not result in the provision of service by either party. Hence, no GST will apply to it.

In case employees lose ID cards, another card is issued in exchange for a fee. However, mostly the cards are printed in-house by companies. This will also not fall under purview of GST after AAR’s ruling.

Moreover, companies make canteen services available through third-party caterer. The company charges a nominal fee from the employees and it is later paid to the caterer. The remaining is covered by the employers. However now, as per AAR, the sum collected from employees will not be covered under GST.