AAR (Gujarat): Tata Autocomp Systems Ltd. Eligible for Canteen Food Input Tax Credit

AAR (Gujarat): Tata Autocomp Systems Ltd. Eligible for Canteen Food Input Tax Credit

In a recent ruling, the Gujarat bench of the Authority for Advance Rulings declared that the deduction made by M/s. Tata Autocomp Systems Ltd. from employees' salaries, specifically for food consumed in the factory, would not be classified as a 'supply' under Section 7 of the Central Goods and Services Tax Act, 2017 (CGST Act). Moreover, the Authority confirmed that the deduction related to the bus transportation facility provided by the transport service provider would also not be considered a 'supply' under the CGST Act.

The applicant, a company involved in the manufacturing, sale, and trading of automotive parts, approached the Authority for Advance Rulings seeking clarity on the applicability of GST to the canteen and transportation facilities provided to their employees.

The bench, consisting of Milind Kavatkar (SGST) and Amit Kumar Mishra (CGST), took into consideration Circular No. 17210412022-GST, which clarified that perquisites offered by an employer to an employee, as stated in their contractual agreement, are not subject to GST.

The bench concluded that the applicant would be eligible for Input Tax Credit (ITC) on the food and beverages provided through the canteen facility, as it was a mandatory requirement under the Factories Act, 1948, and Gujarat Factories Rules, 1963. However, the bench specified that the ITC on GST charged by the canteen service provider (CSP) would be limited to the extent of the cost borne by the applicant.

In addition, the bench held that the transportation services received by the applicant played a significant role in advancing their business activities. As a result, the bench determined that the applicant was potentially eligible to claim credit for the Goods and Services Tax (GST) charged by their transportation service providers. However, this eligibility was subject to the condition that the buses hired by the applicant had a seating capacity exceeding 13 individuals, effective from February 1, 2019.