Mandatory employee canteen supplies qualify for input tax credit, but only for the employer-funded portion of the GST charged.

Input tax credit is admissible on GST charged by a canteen service provider where the employer is legally required to maintain a canteen, because the proviso to the blocked-credit provision for food and beverages applies to inward supplies mandated by law. The statutory canteen obligation under the Factories Act and the Gujarat Factories Rules brings the supply within that exception. The credit is available only to the extent of the employer's own cost, and it does not extend to the portion recovered from employees.

---

---

Issues: Whether input tax credit is admissible on GST charged by the canteen service provider for canteen facilities supplied to employees where the employer is statutorily obliged to maintain a canteen, and if so, whether the credit is limited to the portion of cost borne by the employer.

Analysis: The statutory scheme of section 17(5)(b) blocks credit on food and beverages and similar employee welfare supplies, but the proviso carved out at the end of clause (b) makes credit available where the inward supply is obligatory for an employer to provide under any law in force. The canteen obligation under section 46 of the Factories Act, 1948 read with rule 72 of the Gujarat Factories Rules, 1963 brings the applicant's canteen arrangement within that proviso. The interpretive clarification in Circular No. 172/04/2022-GST also treats the proviso as applicable to the whole of clause (b), supporting availability of credit in such mandatory cases.

Conclusion: Input tax credit is admissible on GST charged by the canteen service provider for the mandatory canteen facility. The credit is confined to the amount borne by the employer and does not extend to the portion recovered from employees.

Final Conclusion: The ruling recognises that a statutorily mandated employee canteen attracts eligible input tax credit under the proviso to the blocked-credit provision, but only to the extent of the employer's own expenditure.

Ratio Decidendi: Where a supply of food and beverages is incurred by an employer under a legal obligation to provide a canteen, the proviso to the blocked-credit provision permits input tax credit, but the entitlement is restricted to the employer-funded portion of the inward supply.

---