'Not supply': AAR rules out GST on canteen fees, notice period pay

The transactions entered into by a company with its employees will no longer attract the goods and services tax (GST). According to a report in the Times of India (TOI), the Haryana bench of the GST Authority of Advance Rulings (AAR) passed the order that such orders would not be considered as "supply" at thus not attract any GST. 

These will include transactions like recovery of notice pay, recovery of the bond amount, deduction of salary for canteen facilities or issue of duplicate ID card. 

The announcement by the AAR bench came after the clarifications issued by the Central Board of Indirect Taxes and Customs (CBIC) in August. 

The AAR bench said that the notice pay is a "safety valve". It is given not as a consideration. It is the employee who is the service provider and services provided by an employee in the course of employment are excluded from the definition of supply under GST laws. The AAR bench observed that notice pay does not result in the provision of service by either party. Thus, no GST applies to it. 

In case of loss of ID cards, employees are issued another car in exchange for a fee. However, most of the cards are printed in-house by companies. This will also not be subject to GST after AAR's ruling. 

Moreover, companies provide canteen services via a third party caterer. A nominal fee is charged by the company from the employees and it is paid to the caterer. The rest is covered by the employers. According to AAR, the sum collected from employees will also not be subjected to GST.