2026-VIL-116-AAR
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SGST Advance Ruling Authority

GST – Karnataka AAR – Eligibility to Input Tax Credit on Canteen Services – Applicant recovers a nominal subsidized amount from regular employees through salary deduction while bearing the substantial balance cost - Whether input tax credit on GST charged by canteen service providers for catering services is admissible to a company that is statutorily obligated to provide canteen facility under Section 46 of the Factories Act, 1948, and if so, whether the credit extends to the entire amount charged or only to the cost actually borne by the employer – HELD – The proviso to Section 17(5)(b) of the CGST Act, 2017 permits such credit where an employer is obligatorily required to provide services to employees under any law, hence, ITC is admissible with respect to catering services provided to regular employees in discharge of statutory obligation under Section 46 of the Factories Act, 1948. However, the admissibility of ITC stands restricted to the extent of the cost of canteen services actually borne by the company - Regarding contract workers, no input tax credit is admissible since there exists no statutory obligation to provide canteen facilities to contractual workers, no direct employer-employee relationship subsists between the company and contract workers. Further, the applicant is not engaged in the business of supplying food or running canteens as its principal activity - Input tax credit of GST charged by canteen service providers is admissible only to the extent of the cost actually borne by the applicant in respect of regular employees. Input tax credit attributable to the portion recovered from regular employees and the entire amount attributable to contract workers is not admissible – Ordered accordingly
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