Factory canteen recoveries are taxable supply under GST, and input tax credit on canteen services remains blocked.
Nominal recoveries from employees for food supplied in a factory canteen constitute consideration for an outward supply under GST, so the canteen supply is taxable. GST is payable on both the amount recovered from employees and the amount paid to the canteen service provider as part of the canteen arrangement. Input tax credit on GST paid for canteen services is blocked and remains inadmissible, even where the canteen is maintained because of statutory factory obligations.
Issues: (i) Whether nominal recoveries from employees for food supplied in the factory canteen constitute a taxable supply; (ii) whether GST is payable on the amount recovered from employees and the amount paid to the canteen service provider; (iii) whether input tax credit is admissible on GST paid on canteen services.
Issue (i): Whether nominal recoveries from employees for food supplied in the factory canteen constitute a taxable supply.
Analysis: The canteen was run in the factory in the course of business and not as part of any employment-linked benefit exempted from tax. The food was supplied to employees for a nominal charge, and the recovery was treated as consideration. The provision of food in the canteen was held to be an outward supply, and supply of food for cash or other valuable consideration was treated as supply of service under the GST framework.
Conclusion: The nominal recoveries from employees constitute a taxable supply.
Issue (ii): Whether GST is payable on the amount recovered from employees and the amount paid to the canteen service provider.
Analysis: The supply of canteen food by the applicant to its employees was held taxable, and the amount recovered from employees was treated as consideration on which GST is payable. The taxable value also included the amount paid to the canteen service provider in the context of the canteen arrangement and infrastructure used for running the facility.
Conclusion: GST is payable on the amount recovered from employees and on the amount paid to the canteen service provider.
Issue (iii): Whether input tax credit is admissible on GST paid on canteen services.
Analysis: The GST paid on canteen facility was held to fall within the blocked credit restriction, and the obligatory nature of the canteen under the Factories Act did not make the credit admissible. The credit was therefore disallowed on the GST paid to the canteen service provider.
Conclusion: Input tax credit is not admissible on the GST paid on canteen services.
Final Conclusion: The application was answered against the applicant on all substantive questions, with the canteen recoveries treated as taxable supply and the related input tax credit denied.
Ratio Decidendi: A canteen facility run by an employer in the course of business, with food supplied to employees for consideration, constitutes a taxable supply under GST, and credit on such canteen services is blocked where the statute so provides.