Employee canteen and transport recoveries are not taxable supplies, while ITC on statutory canteen costs is limited to employer-borne expense.

Amounts recovered from permanent employees for canteen facilities were treated as part of the employment arrangement and not as an independent taxable supply under section 7 of the CGST Act, so GST was not payable. Employee transportation provided under the employer's welfare and commute policy was also held to fall within the employment framework and not constitute a taxable supply under section 7. Input tax credit on GST charged for the statutory canteen facility was allowed under the proviso to section 17(5)(b) because the employer was legally obliged to provide the canteen under the Factories Act, 1948, but only to the extent of the employer-borne cost, excluding the amount recovered from employees.

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Issues: (i) Whether the amount recovered from permanent employees towards canteen facility amounted to a supply under section 7 of the CGST Act, 2017; (ii) Whether the transportation facility provided to employees amounted to a supply under section 7 of the CGST Act, 2017; (iii) Whether input tax credit was admissible on GST charged by the canteen service provider in respect of canteen facility provided to permanent employees.

Issue (i): Whether the amount recovered from permanent employees towards canteen facility amounted to a supply under section 7 of the CGST Act, 2017.

Analysis: Section 7 treats as supply only those transactions made for consideration in the course or furtherance of business, while Schedule III excludes employee services in the course of employment. The canteen facility was provided pursuant to the factory canteen obligation and under the employer's policy, and the recovery was only a nominal subsidy from employees. On these facts, the recovery was treated as part of the employment arrangement and not as an independent taxable supply.

Conclusion: The amount recovered from permanent employees towards canteen facility was not liable to GST as a supply under section 7.

Issue (ii): Whether the transportation facility provided to employees amounted to a supply under section 7 of the CGST Act, 2017.

Analysis: The transport facility was extended only to employees under the transport policy for commute convenience and employee welfare. The arrangement was treated as a perquisite under the employment framework and not as an independent business activity supplying transport services for consideration.

Conclusion: The transportation facility provided to employees was not liable to GST as a supply under section 7.

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

Analysis: Section 17(5)(b) blocks ITC on food and beverages, but the proviso permits credit where an employer is obligated under law to provide the service. The canteen was a statutory requirement under section 46 of the Factories Act, 1948, and the circular clarified that the proviso applies to the whole of clause (b). Therefore, credit was allowable to the extent the cost was borne by the applicant, with proportionate credit attributable to employee recovery excluded.

Conclusion: ITC on GST charged by the canteen service provider was admissible for the statutory canteen facility for permanent employees, subject to restriction to the applicant's own cost and exclusion of the employee-recovered portion.

Final Conclusion: The ruling grants relief on the taxability of employee canteen recoveries and employee transportation, while allowing only restricted ITC on statutory canteen expenses for permanent employees.

Ratio Decidendi: A facility provided to employees under the employment framework and statutory welfare obligations is not a taxable supply under section 7, and ITC on blocked food and beverage credit is available only where the employer is legally obliged to provide the service, subject to limitation to the employer-borne cost.

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