Employee recoveries for canteen, transport and notice pay fall outside GST supply, while ITC survives within statutory limits.

Recovery from employees for a factory canteen and for non-air-conditioned bus transport does not constitute a separate supply under GST when the facility is provided under statutory or employment terms and the employee deduction is only nominal or cost-recovery in nature. Input tax credit on canteen GST is available where the employer is legally obliged to provide the canteen, but only to the extent borne by the employer and subject to the blocked-credit rule. Input tax credit on transport GST is available where the hired buses satisfy the prescribed seating-capacity condition, again limited to the employer-borne cost. Salary recovered in lieu of unserved notice period is not consideration for a taxable service and is not liable to GST.

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Issues: (i) Whether recovery of a nominal amount from employees for canteen facility in the factory premises constitutes a supply under section 7; (ii) whether input tax credit is available on GST charged by the canteen service provider; (iii) whether provision of non air conditioned bus transport facility to employees constitutes a supply under section 7; (iv) whether input tax credit is available on GST charged by the transport service provider; (v) whether salary recovered in lieu of unserved notice period is liable to GST.

Issue (i): Whether recovery of a nominal amount from employees for canteen facility in the factory premises constitutes a supply under section 7.

Analysis: The canteen facility was provided to employees in compliance with the statutory obligation under the Factories Act and pursuant to the employer-employee arrangement reflected in the workplace policy and employment terms. The recovery was only a nominal deduction towards the facility and did not change the character of the arrangement into an independent taxable supply under the scope of supply.

Conclusion: The recovery from employees for factory canteen facility does not constitute a supply under section 7; it is in favour of the assessee.

Issue (ii): Whether input tax credit is available on GST charged by the canteen service provider.

Analysis: Input tax credit on food and beverages is generally blocked under section 17(5)(b), but the proviso permits credit where the employer is legally obliged to provide the facility. Since the canteen was mandated under the Factories Act and the relevant factory rules, the statutory exception applied, though the credit was confined to the cost borne by the employer and excluded the portion recovered from employees.

Conclusion: Input tax credit is available on GST charged by the canteen service provider, subject to restriction to the employer-borne cost; it is in favour of the assessee.

Issue (iii): Whether provision of non air conditioned bus transport facility to employees constitutes a supply under section 7.

Analysis: The transport facility was extended only to employees under the employer's policy and was part of the employment arrangement. The facility was provided for employee convenience and workplace operations, and the recoveries made from employees did not create a separate taxable supply within section 7.

Conclusion: The bus transport facility does not constitute a supply under section 7; it is in favour of the assessee.

Issue (iv): Whether input tax credit is available on GST charged by the transport service provider.

Analysis: Credit was examined in light of section 17(5)(b) and the post-amendment position allowing credit for leasing, renting or hiring of motor vehicles for transportation of persons having approved seating capacity of more than thirteen persons. As the buses hired were of more than thirteen seats, credit was permitted, again limited to the portion borne by the employer and not the employee recovery.

Conclusion: Input tax credit is available on GST charged by the transport service provider, subject to the prescribed seating-capacity condition and cost limitation; it is in favour of the assessee.

Issue (v): Whether salary recovered in lieu of unserved notice period is liable to GST.

Analysis: Amounts deducted towards notice pay were treated as a recovery arising from breach of the employment terms and not as consideration for tolerating an act or for any independent service. Such recoveries do not answer the description of taxable supply under GST.

Conclusion: Notice pay recovery is not liable to GST; it is in favour of the assessee.

Final Conclusion: The ruling grants relief on the substantive taxability questions by holding that the employee recoveries for canteen and transport are outside the scope of supply, that input tax credit is allowable within the statutory limits, and that notice pay deductions are not taxable under GST.

Ratio Decidendi: A recovery made from employees pursuant to statutory or contractual employment terms is not taxable as a separate supply unless it represents consideration for an independent service, and input tax credit is available where a statutory proviso carves out an exception to the blocked-credit rule.

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