Canteen GST and input tax credit depend on employee status and statutory obligation under labour law.

Recovery of subsidised canteen charges from direct employees was not taxable because the facility was provided as a statutory employment benefit under the Factories Act and the recovery represented only the employees' share, without profit element or separate supply. Recovery from contract workers was taxable because they were not employees of the applicant, and the canteen arrangement for them constituted consideration for an outward supply. Input tax credit on canteen service GST was available for direct employees only to the extent the employer was legally obliged to provide the facility, with proportional restriction to the cost borne by the applicant. Credit for canteen facility provided to contract workers was blocked because no corresponding legal obligation on the applicant was established.

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Issues: (i) Whether the amount recovered from employees towards subsidised canteen charges was liable to GST; (ii) whether the amount recovered from contract workers towards canteen charges was liable to GST; (iii) whether input tax credit on GST charged by the canteen service provider was admissible in respect of canteen facility provided to direct employees; and (iv) whether input tax credit was admissible in respect of canteen facility provided to contract workers.

Issue (i): Whether the amount recovered from employees towards subsidised canteen charges was liable to GST.

Analysis: The canteen facility to direct employees was provided pursuant to the statutory obligation under the Factories Act and the employer's HR policy. The recovery from employees was only their subsidised share of the canteen cost, without any profit element, and the arrangement was treated as part of the employment relationship. In such circumstances, the recovery did not constitute a separate taxable supply by the employer to its direct employees.

Conclusion: The recovery from direct employees towards canteen charges was not leviable to GST.

Issue (ii): Whether the amount recovered from contract workers towards canteen charges was liable to GST.

Analysis: Contract workers were not treated as employees of the applicant for GST purposes because the employer-employee test was not satisfied. The canteen supply to contract workers was held to be an activity incidental to the applicant's business, with the applicant recovering a portion of the canteen cost as consideration. The recovery therefore fell within the scope of supply and outward supply under the GST law.

Conclusion: The recovery from contract workers towards canteen charges was leviable to GST.

Issue (iii): Whether input tax credit on GST charged by the canteen service provider was admissible in respect of canteen facility provided to direct employees.

Analysis: Input tax credit on food and beverages is generally blocked, but the statutory proviso allows credit where the employer is obligated under law to provide the facility to employees. The mandatory canteen requirement under the Factories Act brought the direct-employee canteen within the proviso, though the credit was restricted to the extent of cost borne by the applicant and not the portion recovered from employees.

Conclusion: Input tax credit was admissible for canteen facility provided to direct employees, subject to proportional restriction to the applicant's borne cost.

Issue (iv): Whether input tax credit was admissible in respect of canteen facility provided to contract workers.

Analysis: The obligation to provide canteen facilities to contract labour under the applicable labour law was found to rest primarily on the contractor, not on the applicant as principal employer in the facts presented. Since the statutory obligation necessary to attract the proviso to the blocked-credit rule was not established against the applicant for contract workers, the related credit remained blocked.

Conclusion: Input tax credit was not admissible in respect of canteen facility provided to contract workers.

Final Conclusion: The ruling granted relief on the taxability and credit position relating to direct employees, but upheld GST liability and denial of credit for the contract worker portion of the canteen arrangement.

Ratio Decidendi: A subsidised employee canteen recovery linked to a statutory employment benefit is not a taxable supply, whereas recovery from non-employees engaged through a contractor is consideration for an outward supply; input tax credit on canteen services is available only where the employer is under a legal obligation to provide the facility to its own employees.

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