GST on Canteen Services Provided to Employees by KSB Limited
The Maharashtra Authority for Advance Ruling decided that GST applies to employee canteen services only when the employer recovers costs from the employee.
- Ruling
- NO.GST-ARA- 48/2021-22/B- 627 Mumbai, dt. 28/11/2025
- Dated
- 28 Nov 2025
- Authority
- Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- KSB Limited asked if providing canteen services to employees attracts GST.
- The authority ruled that canteen services are a taxable supply of services.
- No GST applies if the company bears the full cost as a perquisite.
- GST is payable only on the amount recovered from employees.
In short
The Maharashtra Authority for Advance Ruling (AAR) examined whether providing canteen facilities to employees attracts Goods and Services Tax (GST). The company, KSB Limited, provides these services through a third-party vendor to comply with the Factories Act. The ruling clarifies how tax applies when the company pays for the food versus when it charges the employee for it.
What has changed
How it worked before
Businesses were often uncertain whether providing mandatory canteen facilities to employees constituted a taxable supply of services, especially when costs were shared between the employer and the employee.
What has changed
The authority decided that if an employer provides canteen services for free, it is a non-taxable perquisite. However, if the employer recovers any portion of the cost from the employee, that recovered amount is treated as a taxable supply of services subject to GST. This means businesses must now track whether they are recovering canteen costs from staff to determine their tax liability.
Who this affects
Manufacturing companies and other businesses that provide canteen facilities to their employees through third-party vendors.
An example
Imagine a software firm that pays a vendor 100 rupees per meal for its staff. If the firm charges the employee 40 rupees for the meal, the firm must pay GST on that 40 rupees. If the firm provides the meal entirely for free, no GST is applicable on the transaction.
What you should do
If you provide canteen services, review your cost-recovery policy. Note that this ruling is specific to KSB Limited and is not automatically binding law for your business. You should consult with your tax advisor to see how this interpretation applies to your specific employment contracts and canteen arrangements.
If you do nothing
If you assume this ruling applies to you and stop paying GST on recovered amounts, your local tax officer may disagree and issue a demand for unpaid tax plus interest and penalties. Relying on a ruling meant for another company provides no legal protection during an audit. Always seek professional advice tailored to your specific business structure.
The terms explained
- Perquisite
- A benefit or privilege provided by an employer to an employee in addition to their salary, often as part of their employment contract.
- Advance Ruling
- A formal decision by tax authorities on how GST laws apply to a specific business question, which binds only the applicant and their tax office.
- Supply of Services
- Any activity carried out by one person for another for a consideration, which may be subject to GST.
The ruling in detail
Authority for Advance Ruling
M/s. KSB Limited
NO.GST-ARA- 48/2021-22/B- 627 Mumbai, dt. 28/11/2025 · Maharashtra
Questions before the authority
- Whether GST would be applicable on canteen facility provided by M/s. KSB Limited to its employees using a third-party canteen services provider?
- In case GST is applicable on Canteen services provided by KSB to its employees, whether GST would be applicable if KSB Limited does not recover any amount from employee for providing canteen facility?
- In case GST is applicable on Canteen services provided by KSB to its employees, whether GST would be applicable if KSB Limited recovers from employee's part or whole of the cost charged by the canteen service provider to KSB?
Facts
The applicant is a manufacturer of liquid handling pumps and is mandated by the Factories Act, 1948 to provide canteen facilities to its employees. The applicant engages third-party vendors to manage these canteens and pays the vendor for the services provided. The applicant sought a ruling on the taxability of these canteen services when provided to employees, specifically regarding scenarios where costs are either fully borne by the company or partially/fully recovered from employees.
Ruling
| Question | What the authority ruled |
|---|---|
| Applicability of GST on canteen facility | The supply of canteen services by the applicant to its employees amounts to supply of services under the MGST Act, 2017. GST would be payable on the said services. Subject to the conditions regarding recovery of costs. |
| GST applicability if no amount is recovered | GST is not applicable, if no amount is recovered from the employees for the canteen services. The cost of said service would be considered as a perquisite. |
| GST applicability if amount is recovered | Yes, GST would be applicable on the amount recovered from the employees for the canteen services. The portion of the cost not recovered would be considered as a perquisite. |
The authority ruled that the supply of canteen services by the applicant to its employees is a taxable supply of services. If no amount is recovered from employees, the service is considered a perquisite and is not subject to GST. If the applicant recovers any amount from employees, GST is applicable on the amount recovered, while the non-recovered portion is treated as a perquisite.
Reasoning
The authority determined that the provision of canteen services is in the course or furtherance of business as it is incidental or ancillary to the applicant's principal manufacturing activity. Relying on CBIC Circular No. 172/04/2022-GST, the authority concluded that perquisites provided by an employer to employees in terms of a contractual agreement are not subject to GST. Consequently, where the employer recovers costs, the recovery is treated as consideration for the supply of services, making it taxable. Where no recovery is made, the service is treated as a non-taxable perquisite.
Provisions relied on
- Section 2(17) of the CGST Act, 2017
- Section 7(1) of the CGST Act, 2017
- Section 98 of the Central Goods and Services Tax Act, 2017
- Schedule I of the CGST Act, 2017
- Schedule III of the CGST Act, 2017
- CBIC Circular No. 172/04/2022-GST dated 06.07.2022
For the practitioner
This ruling clarifies that for employers providing canteen facilities, the taxability hinges on whether costs are recovered from employees. It confirms that **non-recovered costs** are treated as non-taxable perquisites, while **recovered amounts** are subject to GST. Practitioners should note that this ruling aligns with the view that such canteen arrangements constitute a supply of services by the employer to the employee.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/AAR/gst_ara_order_in_case_of_ksb_limited_order_1_11zon-compressed.pdf
Legibility of the scan, as read: high.
Prepared 14-10-2026.
About Patron Accounting LLP
Patron Accounting LLP is a CA and CS-led accounting and compliance firm that has been working with businesses across India since 2019. We handle the work that keeps a company correct with every department it answers to: day-to-day bookkeeping and accounting, GST registration and returns, income tax filing and assessments, TDS, payroll and PF/ESI, company and LLP incorporation, ROC and MCA compliance, statutory and internal audit, physical stock and inventory audits, trademark and other registrations, and the certificates and reports that banks, buyers and regulators ask for.
Our clients range from a first proprietorship registering for GST to established companies running operations across several states. Much of our work is exactly this: reading what a department has published and telling a business, in plain terms, whether it changes anything for them.
We operate from five offices and serve clients across the rest of India remotely:
- Pune (HQ): RTC Silver, B4-708, Sai Satyam Park, Wagholi, Pune, Maharashtra 412207
- Mumbai: 104, Rajshila Building, 597 J.S.S. Road, Marine Lines, Mumbai 400002
- Delhi: 3rd Floor, B-6/154-155, Sector 5, Rohini, Delhi 110085
- Gurugram: Pioneer Urban Square, B109, Golf Course Ext Road, Sector 62, Gurugram 122098
- Ahmedabad: Phoenix Tower, 1107, near Commerce Six Road, Drive In Road, Navrangpura, Ahmedabad, Gujarat 380009
If anything on this page affects you and you would like somebody to look at your own position, we are glad to help. Call +91 94594 56700, write to sales@patronaccounting.com, or visit patronaccounting.com. The first conversation costs nothing.