The Gujarat Authority for Advance Ruling (AAR) has held that amounts recovered by Torrent Pharmaceuticals Limited from its employees towards canteen meals do not constitute a taxable supply, and therefore no Goods and Services Tax (GST) is payable on such recoveries.
The ruling covers two linked questions: whether employee canteen recoveries are a “supply” under GST, and whether the applicant is eligible for Input Tax Credit (ITC) on GST paid to its canteen service provider. The Authority ruled that the recoveries fall outside the scope of supply and that ITC is available to the employer where the provision of a canteen is obligatory under the Factories Act, 1948.
Torrent Pharmaceuticals had relied on earlier Gujarat AAR orders in Alleima India Private Limited (2024), Troikaa Pharmaceuticals Limited, Suzuki Motor Gujarat Private Limited and Eimco Elecon India Limited in support of its position. The Authority accepted the broader logic those orders set out, while noting that advance rulings do not bind the Authority under Section 103 of the CGST Act.
The outcome is in line with a 2022 Gujarat AAR ruling in Intas Pharmaceutical Ltd., which held that where the employer retains no profit margin and simply passes the employee’s share to the canteen service provider, “GST would not be leviable in hands of applicant on amount representing the employee’s portion of canteen charges.”
A separate 2022 Business Standard report noted that experts had sought a Central Board of Indirect Taxes and Customs (CBIC) clarification on the question “as there is confusion despite the ruling.”
The Torrent order gives employers in Gujarat another AAR precedent to cite when structuring canteen contribution recoveries. Advance rulings bind only the applicant and the jurisdictional officer, so companies outside Gujarat should assess their position separately before changing invoicing or ITC practices.
