2026-VIL-171-AAR
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SGST Advance Ruling Authority

GST – Gujarat AAR - Taxability of amount recovered from employees towards canteen facility provided at factory, R&D facility and Corporate office – Applicant provides canteen facility through canteen service providers in terms of a canteen policy. A part of the cost of meals is deducted from the salaries of employees and the remaining cost is borne by the Applicant. The canteen service providers issue tax invoices on the Applicant and charge GST - Whether GST is liable to be discharged on the portion of the amount recovered by the Applicant from its employees towards the canteen facilities - HELD - The canteen facility at the plant and R and D facility is provided as mandated in Section 46 of the Factories Act, 1948, and at the corporate office as mandated in Section 23 of the Gujarat Shops and Establishment (Regulation of Employment and Condition of Service) Act, 2019 - The Applicant provides a demarcated space and the amount is paid to the canteen service provider, a part of which is collected from the employees, on behalf of the employees for administrative convenience - In terms of Circular No. 172/04/2022-GST, perquisites provided by the employer to the employee in terms of contractual agreement entered into between the employer and the employee will not be subjected to GST. The Applicant has provided a copy of the agreement for canteen services to employees under the canteen facility policy - The deduction made by the Applicant from the employees availing food at the factory, R and D facility and corporate office would not be considered as a supply under Section 7 of the CGST Act, 2017, and GST is not liable to be discharged on the amount so recovered – Ordered accordingly - Eligibility of input tax credit on GST charged by canteen service provider under Section 17(5)(b) of CGST Act, 2017 - Whether the Applicant is eligible to avail input tax credit of the GST charged by the canteen service provider for canteen facility provided to its employees - HELD - Circular No. 172/04/2022-GST clarifies that the proviso after sub-clause (iii) of clause (b) of Section 17(5), providing that input tax credit shall be available where it is obligatory for an employer to provide the same to its employees under any law for the time being in force, is applicable to the whole of clause (b) - The Applicant is mandated to provide canteen facility under Section 46 of the Factories Act, 1948 at the factory and R and D facility, and under Section 23 of the Gujarat Shops and Establishment (Regulation of Employment and Condition of Service) Act, 2019 at the corporate office - Input tax credit is available in respect of food and beverages as canteen facility is obligatorily to be provided under law. However, the ITC is restricted to the extent of cost borne by the Applicant, and proportionate credit to the extent embedded in the cost of goods recovered from the employees is not eligible for ITC.
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