Employer-mandated canteen recoveries and credit: GST not levied on permanent employees, but credit stays blocked for others and equipment.

A statutory canteen provided to permanent employees under the Factories Act was treated as an employer-mandated facility, so recoveries from such employees were not treated as an independent taxable supply under GST. Input tax credit on canteen services for permanent employees was allowed only to the extent of the applicant's own cost, not the employee-funded portion. For deputed employees, business travellers and temporary workers, the canteen recoveries were treated as consideration for outward supply, but input tax credit on the related canteen services was denied because the statutory obligation exception did not apply. Input tax credit on kitchen utensils and equipment used for the canteen was also denied under the blocked credit rules.

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Issues: (i) Whether the amount recovered from permanent employees towards canteen facilities is liable to GST; (ii) Whether input tax credit is available on canteen services received for permanent employees; (iii) Whether input tax credit is available on canteen services provided to deputed employees, business travellers and temporary workers; (iv) Whether input tax credit is available on kitchen utensils and equipment used for the canteen.

Issue (i): Whether the amount recovered from permanent employees towards canteen facilities is liable to GST.

Analysis: The canteen facility for permanent employees was found to be a statutory obligation under the Factories Act and was provided under the employer-employee arrangement reflected in the meal policy. The amount recovered from such employees was treated as a perquisite-linked recovery and not as an independent taxable supply under the GST law.

Conclusion: The recovery from permanent employees towards canteen facilities is not liable to GST.

Issue (ii): Whether input tax credit is available on canteen services received for permanent employees.

Analysis: The canteen service was held to be an obligatory facility under the Factories Act, and the restriction in the blocked credit provision was read with the statutory proviso allowing credit where the employer is legally obliged to provide the facility. Credit was, however, confined to the portion of cost borne by the applicant and not to the employee-funded portion.

Conclusion: Input tax credit is available on canteen services for permanent employees to the extent of the applicant's own cost burden.

Issue (iii): Whether input tax credit is available on canteen services provided to deputed employees, business travellers and temporary workers.

Analysis: These categories were held not to fall within the employer-employee relationship of the applicant. The subsidised canteen recovery from them was treated as consideration for outward supply, but the corresponding input tax credit was denied because the credit restriction applied to food and beverages and the statutory obligation-based exception was unavailable.

Conclusion: Input tax credit is not available on canteen services provided to deputed employees, business travellers and temporary workers.

Issue (iv): Whether input tax credit is available on kitchen utensils and equipment used for the canteen.

Analysis: The utensils and equipment were used in connection with a canteen arrangement falling within the blocked-credit framework for food and beverage-related supplies. The claimed business nexus was held insufficient to override the credit restriction.

Conclusion: Input tax credit is not available on kitchen utensils and equipment used for the canteen.

Final Conclusion: The ruling grants relief only in relation to the tax treatment and credit claim connected with permanent employees, while denying relief for deputed personnel, business travellers, temporary workers and the canteen equipment claim.

Ratio Decidendi: A statutory employer-mandated canteen for employees is not a taxable supply when recoveries are made from permanent employees, and input tax credit on such canteen services is admissible only to the extent permitted by the mandatory-employment exception, while recoveries from non-employees remain taxable and blocked-credit restrictions continue to apply.

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