Employee Canteen Expenses - Subject to GST?

On 26.3.18 Advance Ruling Authority of Thiruvananthapuram, Kerala have ruled that

"recovery of food expenses from the employees for the canteen services provided by the company would come under the definition of Outward Supply as defined under section 2(83) of the CGST Act, 2017 and therefore, taxable as a supply of service under GST"

This ruling goes against the Press Release dated 10.7.2017 which reads as below

"It follows therefrom that supply by the employer to the employee in terms of contractual agreement entered into between the employer and the employee, will not be subjected to GST"

The advance ruling authority defines

• Canteen services as "Business" under section 2(17) of the CGST Act, 2017
• Employer as "Supplier" under section 2(105) of the CGST Act, 2017
• Recovery from employees towards canteen  services as consideration under Section 2(31) of the CGST Act, 2017

In view of the above definitions canteen services will be subject to GST as per Authority for Advance Ruling.

This ruling brings in another dimension to this canteen services.  Employer and Employee are "Relatives" as per definition under section 15(5) of the CGST Act, 2017.  This will trigger valuation as per Rule 28 of CGST Rules, 2017 which states as below

The value of the supply of goods or services or both between distinct persons as specified in sub-sections (4) and (5) of section 25 or where the supplier and recipient are related, other than where the supply is made through an agent, shall-

(a)		be the open market value of such supply;
(b)		if the open market value is not available, be the value of supply of goods or services of like kind and quality;
(c)		if the value is not determinable under clause (a) or (b), be the value as determined by the application of rule 30 or rule 31, in that order:

This ruling has opened up a new front for debate and litigation.