GST treatment of employee welfare facilities: canteen recoveries and bus transport not taxable, but canteen credit blocked and bus hire credit allowed.

Employee recoveries for canteen charges and free bus transport provided under HR policy were treated as employment-linked welfare facilities, not supplies made by the employer in the course or furtherance of business, so they were not taxable under GST in the employer's hands. Input tax credit on GST paid for canteen services was blocked because food and catering services fell within the specific restriction on blocked credit. Input tax credit on GST paid for hiring buses was admissible because the statutory vehicle restriction applied only to motor vehicles with approved seating capacity of not more than thirteen persons, and the buses used exceeded that threshold.

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Issues: (i) Whether employee recoveries towards canteen charges were taxable under GST as a supply by the employer; (ii) Whether free bus transportation facility provided to employees was taxable under GST; (iii) Whether input tax credit on GST paid for canteen services was admissible; (iv) Whether input tax credit on GST paid for hiring buses having approved seating capacity of more than thirteen persons was admissible.

Issue (i): Whether employee recoveries towards canteen charges were taxable under GST as a supply by the employer.

Analysis: The arrangement for canteen facility was operated through a third-party service provider, with the employer collecting only the employees' subsidised share and remitting it to the service provider without retaining any profit margin. The activity was found to be connected with the employment arrangement and not to have been undertaken in the course or furtherance of the employer's business so as to constitute a taxable supply by the employer.

Conclusion: The employee portion of canteen charges was not taxable in the hands of the employer.

Issue (ii): Whether free bus transportation facility provided to employees was taxable under GST.

Analysis: The transportation facility was provided to employees under the HR policy through a third-party vendor and free of cost to employees. It was treated as a facility arising from the employment relationship and not as a supply made by the employer in the course or furtherance of business.

Conclusion: Free bus transportation facility was not taxable in the hands of the employer.

Issue (iii): Whether input tax credit on GST paid for canteen services was admissible.

Analysis: The inward supply of food and catering services fell within the blocked credit provision. The proviso relating to mandatory provision under law was read as applying independently to the later sub-clause dealing with employee vacation benefits and not to the clause covering food and beverages. Accordingly, the credit restriction remained applicable to canteen services.

Conclusion: Input tax credit on GST paid for canteen services was inadmissible.

Issue (iv): Whether input tax credit on GST paid for hiring buses having approved seating capacity of more than thirteen persons was admissible.

Analysis: The buses used for employee transportation had approved seating capacity of more than thirteen persons. The statutory restriction on motor vehicles applied to vehicles having seating capacity of not more than thirteen persons, and therefore did not block credit for the buses in question.

Conclusion: Input tax credit on GST paid for hiring buses with approved seating capacity of more than thirteen persons was admissible.

Final Conclusion: The ruling accepted the non-taxability of the employer's employee recoveries for canteen charges and the free employee bus facility, while denying credit on canteen services and allowing credit on hiring larger-capacity buses.

Ratio Decidendi: Employee recoveries for welfare facilities that are merely administered by the employer and do not constitute business supply are not taxable as supplies, but input tax credit remains blocked where the statute specifically excludes the inward supply, while vehicle credit restrictions turn on the approved seating-capacity threshold.

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