SEZ Canteen Charge Recovery Not Taxable Under GST

Case Details: Zydus Hospira Oncology (P.) Ltd., In re [2025] 181 taxmann.com 643 (AAR - GUJARAT)

Judiciary and Counsel Details

Sushma Vora & Vishal Malani, Member
Hiren Pathak, Authorised Signatory for the Applicant.

Facts of the Case

The applicant sought clarification regarding the applicability of GST on recoveries of employees’ share of canteen charges. It was submitted that it was an SEZ pharmaceutical unit mandated under the Factories Act, 1948 to provide a canteen facility for its employees. It recovered a fixed portion of the meal cost from employees through salary deductions, while the remaining cost was borne by the applicant as part of staff welfare. It was contended that such recoveries were employee perquisites and did not constitute a supply under GST. The matter was accordingly placed before the Authority for Advance Ruling (AAR).

AAR Held

The AAR held that the applicant’s recovery of employees’ share of canteen charges did not constitute an outward supply under Section 7 of the CGST Act and the Gujarat GST Act. It was observed that the collection of the employees’ portion and its subsequent remittance to the canteen service provider were merely internal adjustments related to employee perquisites and were not made in the course or furtherance of the business. Applying the guidance of the CBIC Circular, it concluded that recoveries of this nature fall outside the definition of supply under Schedule III. Consequently, GST was not leviable on the employees’ share of canteen charges.

List of Cases Referred to

Amneal Pharmaceuticals (P.) Ltd., In re [2021] 126 taxmann.com 228/[2022] 58 GSTL 382 (AAAR-GUJARAT) (para 13)
Zentiva (P.) Ltd., In re [2024] 163 taxmann.com 276 (AAR – GUJARAT) (para 13)
Zydus Lifesciences Ltd., In re [2022] 143 taxmann.com 346 (AAR – GUJARAT) (para 13)
Cinemax India Ltd. v. UOI [2011] 12 taxmann.com 492/32 STT 359 (Gujarat) (para 15)
Tata Power Company Ltd., In re [2022] 134 taxmann.com 69/89 GST 655/57 GSTL 141 (AAR – MAHARASHTRA) (para 16)
Tata Motors Ltd., In re [2020] 119 taxmann.com 106/82 GST 685/41 GSTL 35 (AAR – MAHARASHTRA) (para 16)
Posco India Pune Processing Center (P.) Ltd., In re [2019] 102 taxmann.com 21/21 GSTL 351 (AAR – MAHARASHTRA) (para 16)
Jotun India (P.) Ltd., In re [2019] 110 taxmann.com 184/76 GST 691/29 GSTL 778 (AAR – MAHARASHTRA) (para 16)
MMR Khan v. UOI 1990 AIR 937 (para 17)
Troikaa Pharmaceuticals Ltd., In re [2023] 146 taxmann.com 128 (AAR – GUJARAT) (para 21)
CCE, Nagpur v. Ultratech Cement Ltd. [2010] 20 STR 577/29 STT 244 (Bombay) (para 27).