No Input Tax Credit allowed for GST paid on canteen facility for employees- GST AAR Gujarat
Since introduction in July, 2017, the controversies and confusions in the GST laws are only grossing up. One such issue of controversy is the GST implication on various amenities provided to employees by an employer. Different Advance Ruling Authorities have rendered conflicting rulings in this respect which have played a role of increasing the confusion only. In this article, we are discussing a recent advance ruling rendered by Gujarat Advance Ruling Authority in the case of Tata Motors Limited. The issue covered here is the admissibility of input tax credit on GST paid for canteen facilities for employees.
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Name of the Applicant: |
Tata Motors Limited |
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Appeal No.: |
Advance Ruling No. GUJ/GAAR/R/39/2021 |
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Ruling pronounced by: |
GST AAR Gujarat |
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Date of Ruling: |
30-07-2021 |
Brief Facts:
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The applicant is maintaining canteen facility to its employees at its factory premises to comply with the mandatory requirement of maintaining the canteen as per the Factories Act, 1948. The applicant submits that as per the proviso to Section 17(5)(b) of CGST Act, 2017, ITC of GST paid on 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. |
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The applicant is recovering a nominal amount on monthly basis to ensure use of canteen facility only by authorized persons/ employees and expenditure incurred towards canteen facility (net of recovery from employees) borne by applicant is part and parcel of cost to company. |
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In press release dated 10.07.2017 also, it was clarified that, supply by employer to employee in terms of contractual agreement of employment (part of salary/CTC) is not subject to GST. Once employee ceases to be in employment with Applicant, he/she is not authorized to use the canteen facility. In other words, employer-employee relationship is must to avail canteen facility. |
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The applicant is submitted that they are not in the business of providing canteen service and hence recovery of nominal amount will not fall in the definition of supply. The applicant quoted the ruling of Maharashtra AAR in the case of Jotun India (P) Ltd. 2019-TIOL-312-AAR-GST in support of his opinion. |
Question before Authority & Ruling:
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Whether input tax credit available on GST charged by service provider on canteen facility provided to employees working in factory. |
ITC on GST paid on canteen facility is blocked credit under Section 17(5)(b)(i) of CGST Act and inadmissible to applicant. |
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Whether GST is applicable on nominal amount recovered by applicants from employees for usage of canteen facility |
GST, at the hands on the applicant, is not leviable on the amount representing the employees’ portion of canteen charges, which is collected by the applicant and paid to the canteen service provider. |
Author’s Note: The above ruling needs a reconsideration as the matter is clearly covered by proviso to Section 17(5)(b) of CGST Act, 2017. Since, the employer is obliged to provide canteen facilities to employees due to applicability of Factories Act, 1948, it should be eligible for availing ITC in respect of canteen facilities provided to the employees. The issue needs a clarification from the side of CBIC. Also read the following article in respect of above issue:
Source: The article is based on the advance ruling of Gujarat Advance Ruling Authorities. You may access the above advance ruling at the following link: Tata Motors LImited Advance Ruling- GST AAR Gujarat
Disclaimer: The above article is based on the advance ruling rendered by the Gujarat AAR and is meant for informative purposes only. Readers are requested to act diligently and with due care and consultation of any subject expert. ‘Taxwink’ is not responsible for any loss or damage caused to any reader for application of above information in any manner.
