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of <h1>Employee canteen deductions under Factories Act not taxable supply but charges to contract workers are taxable under section 7</h1> <h3>In Re: M/s. Suzuki Motor Gujarat Pvt Ltd.</h3> In Re: M/s. Suzuki Motor Gujarat Pvt Ltd. - 2024 (84) G.S.T.L. 275 (A. A. R. - GST - Guj.) Issues Involved:1. GST liability on the amount recovered from employees for canteen facilities.2. Eligibility for Input Tax Credit (ITC) on GST charged by the canteen service provider for permanent employees.3. Eligibility for ITC on GST charged by the canteen service provider for employees on deputation, business travel, and temporary workers.4. Eligibility for ITC on inputs like equipment and kitchen utensils used for providing canteen facilities.Summary:Issue 1: GST Liability on Amount Recovered from Employees for Canteen FacilitiesThe applicant provides canteen facilities to its employees as mandated by Section 46 of the Factories Act, 1948. The deduction made by the applicant from the permanent employees for availing food in the factory canteen is not considered a 'supply' under section 7 of the CGST Act, 2017. However, this finding is only applicable to permanent employees and not to employees of SMC on deputation, MSIL on business travel, and temporary workers. For these categories, the recovery of the amount falls under the definition of 'outward supply' as per section 2(83) of the CGST Act, 2017, and is liable to tax under GST.Issue 2: Eligibility for ITC on GST Charged by Canteen Service Provider for Permanent EmployeesThe applicant is eligible to avail ITC in respect of the GST charged by the canteen service provider for canteen facilities provided to its permanent employees. This is based on Section 17(5)(b) as amended effective from 1.2.2019 and clarified by CBIC circular No. 172/04/2022-GST dated 6.7.2022. The ITC is restricted to the extent of the cost borne by the applicant, disallowing proportionate credit embedded in the cost recovered from employees.Issue 3: Eligibility for ITC on GST Charged by Canteen Service Provider for Employees on Deputation, Business Travel, and Temporary WorkersThe applicant is not eligible to avail ITC for the GST charged by the canteen service provider for canteen facilities provided to employees of SMC on deputation, MSIL on business travel, and temporary workers. This is in accordance with section 17(5)(b)(i) of the CGST Act, 2017, which restricts ITC on supply of food and beverages.Issue 4: Eligibility for ITC on Inputs Used for Providing Canteen FacilitiesThe applicant is not eligible to avail ITC on kitchen utensils and equipment like water coolers, dishwashers, plates, worktables, etc., used for providing canteen facilities. This ruling is based on section 17(5)(b)(i) of the CGST Act, 2017, and notification No. 13/2018-CT (Rate) dated 26.7.2018, which restricts ITC on such items.Ruling:1. GST is not liable on the amount recovered from permanent employees for canteen facilities. However, it is liable on the amount recovered from employees of SMC on deputation, MSIL on business travel, and temporary workers.2. The applicant is eligible for ITC on GST charged by the canteen service provider for permanent employees, restricted to the cost borne by the applicant.3. The applicant is not eligible for ITC on GST charged by the canteen service provider for employees on deputation, business travel, and temporary workers.4. The applicant is not eligible for ITC on inputs like equipment and kitchen utensils used for providing canteen facilities.
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