In advance ruling sought by Tata Motors Limited, Gujarat Advance Ruling Authority has stated that GST paid on canteen facility would not be allowed as input tax credit as the same is blocked credit under section 17(5)(b)(i) of CGST Act. The ITC in regard to canteen facility would remain inadmissible even if the canteen facility is being maintained by the company as a mandatory obligation under any law applicable for the time being in force.
Company’s opinion was that, since there is a mandatory requirement to maintain the canteen under the Factory Act 1948, therefore they would be provided the benefit of the proviso mentioned after Section 17(5)(b)(iii) which stated that ITC shall be available in respect of goods of services if the same are provided to the employee under mandatory obligation under any law. Therefore the ITC for canteen facility should be allowed to them.
Food and beverages are blocked credit under 17(5)(b)(i). The Advance Ruling authority has stated that the said proviso is only applicable for clause (iii) of Section 17(5)(b) which is for travel benefits provided to employees on vacations including home travel. This proviso is not applicable for clause (i) of Section 17(5)(b) as the discussed clauses after their end are separated by semi colon indicating that each clause is independent and separate.
Legal Provision : Section 17 (5)(b)
Section 17(5)(b)
“(b) the following supply of goods or services or both-
(i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) except when used for the purposes specified therein, life insurance and health insurance:
Provided that the input tax credit in respect of such goods or services or both shall be available where an inward supply of such goods or services or both is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply;
(ii) membership of a club, health and fitness centre; and
(iii) travel benefits extended to employees on vacation such as leave or home travel concession:
Provided that the input tax credit in respect of such goods or services or both 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.”
GST not payable on canteen charges recovered by employee and paid to Canteen service provider
The other question asked by the company was whether GST would be applicable on the amount which is recovered by the employees and paid to the canteen service provider.
The company recovers nominal amount for the canteen facility from the employees and pay the same to the canteen service provider. The difference amount between the canteen service cost and recovery made from employee is borne by the company.
Advance Ruling authority said that GST would not be applicable on the amount which the company pays to the canteen service provider after recovery from the employees as that particular cost is paid by employee to the canteen service provider. GST would be applicable only on that portion which is borne by the company.
