The Gujarat Authority for Advance Ruling (AAR) has ruled that amounts recovered by Torrent Pharmaceuticals from employees towards the cost of canteen meals are not liable to Goods and Services Tax (GST), as the recoveries do not constitute a supply under the Central Goods and Services Tax (CGST) Act.
The ruling relates to canteen facilities provided at Torrent Pharmaceuticals’ manufacturing plant at Indrad, its research and development (R&D) facility at Bhat in Ahmedabad and its corporate office at Torrent House. The company has more than 250 employees at the plant and R&D facility, while its corporate office has more than 100 employees.
Canteen Facilities As Statutory Requirement
Torrent told the AAR that providing canteen facilities was a statutory requirement. For its plant and R&D facility, the company cited Section 46 of the Factories Act, 1948, which requires factories employing more than 250 workers to provide and maintain a canteen.
For the corporate office, Torrent relied on Section 23 of the Gujarat Shops and Establishments Act, 2019, which applies to establishments with 100 or more employees.
Under Torrent’s canteen policy, the cost of meals is shared between the company and employees. At the plant and R&D facility, Torrent subsidises 50 per cent of the cost of breakfast, meals and snacks, while the remaining amount is recovered from employees through salary deductions.
At the corporate office, the subsidy varies according to employee pay grades. The canteen service provider raises invoices on Torrent and charges 5 per cent GST. Torrent does not earn any profit on the amount recovered from employees.
Employee Recoveries Not A Supply
The AAR examined whether the deductions from employees could be treated as consideration for a supply by Torrent. It concluded that the recoveries did not constitute a supply under Section 7 of the CGST Act and therefore were not liable to GST.
The authority also held that Torrent could claim input tax credit on the GST charged by the canteen service provider, given the statutory requirement to provide the facilities. However, the credit would be restricted to the cost actually borne by Torrent.
AAR Ruling
The ruling was issued by SGST Member Sushma Verma and CGST Member Vishal Malani under Advance Ruling No. GUJ/GAAR/R/2026/36.The ruling provides clarity on the GST treatment of employee contributions towards statutory workplace canteen facilities and the extent to which employers can claim input tax credit on such services.
Source from: https://www.bwpeople.in/article/employee-canteen-meal-recoveries-not-a-gst-supply-says-gujarat-aar-627332
