Employee canteen recoveries are taxable, while free bus transport is outside supply and related input tax credit is denied.

Nominal recovery from employees for canteen facilities was treated as consideration for a taxable supply, so GST applies on the amount recovered even though the facility is subsidised and mandated under the Factories Act, 1948. Input tax credit on the canteen contractor's GST was denied because the inward supply was taxed as restaurant service at a concessional rate without ITC. Free non-air-conditioned bus transport provided only to employees was treated as an employment-linked perquisite outside taxable supply, so no GST was attracted. Input tax credit on GST charged by the transport service provider was also denied because the transport was regarded as employee consumption and within the credit restriction.

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Issues: (i) Whether the nominal recovery from employees for canteen facility amounts to supply of service and attracts GST; (ii) Whether input tax credit is available on GST charged by the canteen service provider; (iii) Whether provision of free non-air-conditioned bus transportation to employees amounts to supply of service; (iv) Whether input tax credit is available on GST charged by the transport service provider.

Issue (i): Whether the nominal recovery from employees for canteen facility amounts to supply of service and attracts GST.

Analysis: The canteen facility was found to be provided in the course of the employer's business and as part of the employment arrangement. The Authority held that the employer supplies canteen services to employees for consideration, even though the employees pay only a subsidized portion and the balance is borne by the employer. The statutory obligation under the Factories Act, 1948 did not change the character of the transaction as a taxable supply. The recovery from employees was also treated as not being a mere perquisite to the extent charged.

Conclusion: The nominal recovery is a supply of service and GST is payable on the amount recovered from employees.

Issue (ii): Whether input tax credit is available on GST charged by the canteen service provider.

Analysis: Although food and catering ordinarily fall within the blocked-credit rule, the proviso to section 17(5)(b) was treated as applicable where the employer is legally obliged to provide the facility. The canteen was held to be mandatory under section 46 of the Factories Act, 1948. However, the Authority further held that the canteen contractor was providing restaurant service taxable at the concessional rate without ITC under the applicable rate notification, and therefore the applicant could not claim ITC on the tax charged by the contractor.

Conclusion: ITC on GST charged by the canteen service provider is not available.

Issue (iii): Whether provision of free non-air-conditioned bus transportation to employees amounts to supply of service.

Analysis: The transportation facility was provided only to employees as a free employment-linked benefit. The Authority treated such free transportation as a perquisite under the employment arrangement and, by a corollary reading of Schedule III and the CBIC clarification, held that it should not be subjected to GST. Since no amount was recovered from employees, the transaction was not treated as a taxable supply in the hands of the applicant.

Conclusion: The provision of free non-air-conditioned bus transportation does not amount to a supply of service.

Issue (iv): Whether input tax credit is available on GST charged by the transport service provider.

Analysis: The Authority held that transport of employees from residence to the factory was for personal consumption or comfort of employees and not covered by the input credit entitlement claimed by the applicant. The hiring of motor vehicles for such employee transport was treated as falling within the credit restriction, and the applicant was held ineligible to claim ITC on the transport invoices.

Conclusion: ITC on GST charged by the transport service provider is not available.

Final Conclusion: The application succeeds only on the question of free employee transportation being outside the scope of taxable supply, while the canteen recovery is taxable and credit on both canteen and transport procurements is denied.

Ratio Decidendi: A subsidized employee facility provided under an employment arrangement may still constitute a taxable supply if consideration is recovered from employees, but ITC depends on the specific credit restrictions and the nature of the inward supply, including whether it is legally obligatory and whether it is used for personal consumption.

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