Employee recoveries for canteen and transport are taxable supplies, with GST limited to the amount actually recovered.

Employee recoveries for canteen and bus transport facilities are treated as consideration for taxable supplies where the employer procures the services from third parties and recovers part of the cost from employees. The claimed exemption for non-air-conditioned bus transport is not available because the arrangement is not a direct contract carriage supply by the employer within the exemption entry. Input tax credit is admissible on canteen services, given the employer's statutory obligation to provide a canteen, and on bus transport services subject to the recorded factual conditions. GST is payable only on the amount recovered from employees, while the employer-borne balance is not included in the taxable value.

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Issues: (i) whether recoveries from employees for canteen facility and bus transport facility are taxable under GST; (ii) whether non-air-conditioned bus transport is exempt under Notification No. 12/2017-Central Tax (Rate); (iii) whether input tax credit is admissible on canteen and bus transport services procured from third parties to the extent cost is borne by the Applicant; (iv) what value is liable to GST where employee recoveries are made.

Issue (i): whether recoveries from employees for canteen facility and bus transport facility are taxable under GST

Analysis: The Applicant's canteen and transport arrangements were held to be part of its business because they supported the principal manufacturing activity and were incidental or ancillary to it. The transactions between the Applicant and its employees were treated as separate supplies for consideration, since the Applicant procured the services from third-party vendors and recovered part of the cost from employees. The reasoning also relied on the later CBIC clarification that contractual perquisites by an employer to employees may fall outside GST only to the extent they are true perquisites, but not the recovered portion.

Conclusion: The recoveries made from employees for canteen and bus transportation facilities are taxable under GST.

Issue (ii): whether non-air-conditioned bus transport is exempt under Notification No. 12/2017-Central Tax (Rate)

Analysis: The claimed exemption for non-air-conditioned contract carriage was rejected because the Applicant was not itself operating a contract carriage service in the statutory sense. The transport arrangement was found to be a rented transport service / passenger transport service procured from a service provider and then supplied to employees, not a direct contract carriage supply by the Applicant falling within the exemption entry.

Conclusion: The transportation recoveries are not covered by the exemption under Notification No. 12/2017-Central Tax (Rate).

Issue (iii): whether input tax credit is admissible on canteen and bus transport services procured from third parties to the extent cost is borne by the Applicant

Analysis: For canteen services, ITC was held available because the employer was under a statutory obligation to provide a canteen under the Factories Act, and the blocking provision in section 17(5) was read with its proviso allowing credit where an employer is legally obliged to provide the service. For bus transport, ITC on hired motor vehicles having approved seating capacity of more than thirteen persons was treated as not blocked, while the service was not regarded as personal consumption in the facts found by the Authority.

Conclusion: ITC is admissible on the canteen service and on the bus transport service to the extent of the cost borne by the Applicant, subject to the factual conditions recorded in the ruling.

Issue (iv): what value is liable to GST where employee recoveries are made

Analysis: The taxable value was confined to the actual amount recovered from employees. The balance cost borne by the Applicant was treated as a perquisite element in the employment context and not subjected to tax in the value computation adopted by the Authority.

Conclusion: GST is payable only on the amount recovered from the employees.

Final Conclusion: The ruling treats the employee recoveries for canteen and transport as taxable supplies, denies the claimed transport exemption, allows credit on the recorded factual basis for inward supplies, and limits the taxable value to the recoveries actually collected.

Ratio Decidendi: Where an employer procures canteen or transportation services from third parties and recovers a part of the cost from employees, the recovered amount is consideration for a taxable supply if the activity is connected with the employer's business; exemption and ITC consequences then depend on the specific statutory entry and the legal obligation, seating-capacity, and blocked-credit conditions applicable to the inward supply.

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