Yes, sure it's subjected to GST as per extant rules.
Schedule II to the GST Act describes the activities to be treated as supply of goods or supply of services. As per clause 6 of the Schedule, the following composite supply is declared as supply of service.
"supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration. "
The AAR observed that even though there is no profit as claimed by the applicant on the supply of food to its employees, there is ‘supply’ as provided in Section 7(1) (a) of the GST Act, 2017. The applicant would definitely come under the definition of ‘Supplier’ as provided in sub-section (105) of Section 2 of the GST Act, 2017.
Further, since the applicant recovers the cost of food from its employees, there is consideration as defined in Section 2(31) of theGST Act, 2017.
The Authority for Advance Ruling (AAR) ruled that the recovery of food expenses from the employees for the canteen services provided by company would come under the definition of ‘outward supply’. Therefore, it would be taxable as a supply of service under GST.
The AAAR observed that crucial issues involved are that of ‘consideration’ and ‘supply’. It held that inspite of the absence of any profit, the activity of supplying food and charging price for the same from the employees would surely come within the definition of ‘supply’ as provided in Section 7(1)(a) of the GST Act, 2017. Consequently, the appellant would definitely come under the definition of ‘supplier’ as provided in sub-section (105) of Section 2 of the GST Act, 2017. Moreover, since the appellant was recovering the cost of food items from their employees, there was ‘consideration’ as defined in Section 2(31) of the GST Act, 2017.
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As such, the question of who would bear the addl.levy is left to the discretion of the employer/employee combine. Most of these canteen supplies are subsidised and any GST will have to be subsumed in the subsidy if employees not agreeing a proportionate increase in prices of food stuffs supplied in the canteen.