Gujarat AAAR: GST applies to the portion of canteen charges collected from contractual workers because there is no employer-employee relationship

 

  1. Issue Involved:

    • Whether GST applies to canteen charges recovered from employees and contractual workers.

    • Availability of ITC on GST paid to the canteen service provider for food provided to employees and contractual workers.

  2. Facts:

    • Troikaa Pharmaceuticals provides subsidized canteen facilities to employees and contractual workers.

    • The company recovers 50% of canteen costs from employees.

    • For contractual workers, the canteen service provider directly bills only 50% of the charges to Troikaa Pharmaceuticals; the rest is paid directly by workers.

  3. Advance Ruling:

    • GST does not apply to amounts collected from employees for canteen services.

    • GST applies to amounts collected from contractual workers.

    • ITC is available for GST paid on food provided to employees (under statutory obligation).

    • ITC is not available for food provided to contractual workers, as providing such canteen services to contractual workers isn't legally mandated.

  4. Grounds for Appeal:

    • Troikaa Pharmaceuticals argued it has statutory obligations under the Contract Labour (Regulation and Abolition) Act, 1970, and the Factories Act, 1948, to provide facilities, including canteen services, to contractual workers.

    • The appellant claimed a principal-employer status over contractual workers, asserting that the employer-employee relationship indirectly exists due to statutory responsibilities.

  5. Findings of the Appellate Authority:

    • Contractual workers do not form an employer-employee relationship with Troikaa Pharmaceuticals; hence, GST is applicable to the canteen charges recovered from them.

    • Responsibility to provide canteen facilities primarily lies with the labor contractor. The principal employer's obligation arises only if the contractor fails in fulfilling this statutory duty. There was no evidence provided by the appellant that the contractor failed in this responsibility.

    • The contractual terms explicitly denied an employer-employee relationship between Troikaa Pharmaceuticals and contractual workers.

    • The circular cited by the appellant (Circular No. 172/14/2022-GST) applies only to employer-employee relationships, which does not exist in the case of contractual workers.

  6. Conclusion:

    • The AAAR upheld the Advance Ruling. GST applies to canteen charges collected from contractual workers, and ITC is not admissible for GST paid on such charges.

The appeal filed by Troikaa Pharmaceuticals Limited was accordingly dismissed, reaffirming the applicability of GST on contractual worker charges and denial of ITC.

Click here for Full Judgment


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