M/S CALTECH POLYMERS PVT. LTD. [2018 (10) TMI 1313 (AAAR, KERALA)] :
Background: Caltech Polymers Pvt. Ltd., engaged in manufacturing footwear, provided canteen services exclusively to its employees within its factory premises. The company incurred expenses for running the canteen, including the cost of food items purchased directly from suppliers. These expenses were recovered from employees based on the amount of food consumed, without any profit margin.
Point of Dispute: The key issue was whether recovering food expenses from employees for canteen services constituted a “supply” under GST law, thereby making it taxable.
Submissions by the Assessee: Caltech Polymers argued that providing subsidized food to employees did not fall within the scope of ‘supply’. They contended it was a statutory obligation rather than a business activity. They only recovered the actual cost of food, ensuring no profit was made.
Findings of the AAAR: The Appellate Authority for Advance Ruling (AAAR) observed that despite no profit margin, the act of supplying food to employees in exchange for payment constituted a ‘supply’ under GST law. This was because the transaction involved consideration (the cost of food recovered from employees).
Held: The AAAR concluded that the supply of food items to employees through the company’s canteen was indeed taxable under GST. Even though the company did not profit from this service, the recovery of costs from employees qualified as consideration, meeting the definition of ‘supply’ under GST law.
Remarks: This ruling highlights that even non-profit activities such as providing subsidized food in employee canteens can fall under GST if consideration is involved. This interpretation aligns with GST principles where any transaction involving consideration is generally considered a supply, irrespective of profit motive.
