GST on Canteen Salary Deductions: Zydus Lifesciences Advance Ruling
The Goa Authority for Advance Ruling decided that salary deductions for mandatory factory canteen meals are not subject to GST.
- Ruling
- GOA/GAAR/03 of 2023-24/3465 dated 06/11/2025
- Dated
- 06 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
- Zydus Lifesciences asked if canteen salary deductions count as a taxable supply.
- The authority ruled these deductions are not a supply under GST law.
- Canteen facilities provided to meet Factories Act rules are employee perquisites.
- No GST applies to the amount recovered from employee salaries.
In short
The company asked if the money they take from employee salaries to pay for canteen meals counts as a taxable sale under the Goods and Services Tax (GST) law. The authority looked at whether this arrangement is a business supply or simply a benefit provided as part of an employment contract.
What has changed
How it worked before
Businesses were often unsure if recovering part of the meal cost from employees made the canteen service a taxable supply, leading to confusion over whether to charge GST on those deductions.
What has changed
The authority confirmed that these deductions are not a supply, meaning they are not liable for GST. This clarifies that providing canteen facilities to meet legal requirements is a staff benefit, not a commercial transaction.
Who this affects
Factory owners and businesses that provide canteen facilities to employees and recover a portion of the cost through salary deductions.
An example
A manufacturing firm in Goa provides a canteen to comply with the Factories Act. They deduct a small amount from employee salaries to cover part of the meal cost. Based on this ruling, the firm does not need to pay GST on the money deducted from their employees' paychecks.
What you should do
This ruling only applies to the company that asked for it. If you are in a similar situation, you should consult your tax advisor to see if your specific employment contracts and canteen arrangements match the conditions described here.
If you do nothing
If you assume this ruling automatically applies to your business, you might incorrectly stop paying GST on canteen services. If a tax officer disagrees with your interpretation, you could face demands for unpaid tax, interest, and penalties. Always verify your specific facts with a professional before changing your tax filing practices.
The terms explained
- Supply
- A transaction like a sale, transfer, or exchange that is subject to GST.
- Perquisite
- A benefit or privilege provided to an employee in addition to their regular salary.
- Statutory obligation
- A duty or requirement that a business must fulfill because it is written into law.
The ruling in detail
Authority for Advance Ruling
ZYDUS LIFESCIENCES LIMITED
GOA/GAAR/03 of 2023-24/3465 dated 06/11/2025 · Goa
Questions before the authority
- Whether the subsidized deduction made by the Applicant from the employees who are availing food in the factory would be considered as a "supply" by the Applicant under the provisions of Section 7 of Central Goods and Services Tax Act, 2017 and Goa Goods and Services Tax Act, 2017.
- In case answer to above is yes, whether GST is applicable on the amount deducted from the salaries of its employees?
- In case answer to above is no, GST is applicable on which portion i.e. amount paid by the Applicant to the Canteen Service Provider or only on the amount recovered from the employees?
Facts
The applicant operates a factory and provides canteen facilities to its employees through a third-party Canteen Service Provider to comply with statutory requirements under the Factories Act, 1948. A portion of the meal cost is recovered from employees via salary deductions, while the applicant bears the remaining cost as a staff welfare expense. The applicant sought a ruling on whether these salary deductions constitute a taxable supply under the GST regime.
Ruling
| Question | What the authority ruled |
|---|---|
| Whether subsidized salary deduction is a supply | No Not considered a supply under GST Acts |
| Applicability of GST on deducted amount | Not applicable Question did not survive due to negative answer on supply |
| Applicability of GST on specific portions | Not applicable Question did not survive due to negative answer on supply |
The authority ruled that the deduction of a portion of the cost from employee salaries for canteen facilities provided at the factory premises does not constitute a supply under the GST Acts. Consequently, such deductions are not liable to GST. The remaining questions were not addressed as they were contingent on an affirmative answer to the first question.
Reasoning
The authority relied on Circular No. 172/04/2022-GST dated 06/07/2022, which clarifies that perquisites provided by an employer to employees in terms of a contractual agreement are not subject to GST. It noted that the canteen facility is provided to discharge a statutory obligation under Section 46 of the Factories Act, 1948. Since the activity is a perquisite provided in accordance with the employment contract, it falls outside the scope of supply under the GST framework.
Provisions relied on
- Section 7 of the Central Goods and Services Tax Act, 2017
- Section 46 of the Factories Act, 1948
- Circular No. 172/04/2022-GST dated 06/07/2022
For the practitioner
This ruling confirms that **subsidized canteen deductions** from employee salaries for facilities mandated by the Factories Act are not subject to GST. It provides significant relief to employers by aligning with the CBIC circular on perquisites. Practitioners can use this to argue against the levy of GST on similar employer-provided welfare facilities that are part of the employment contract.
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/10-order_ara_zydus_lifesciences.pdf
Legibility of the scan, as read: high.
Prepared 15-10-2026.
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