Input tax credit on statutory canteen services is allowed only for cost actually borne by the employer, not recovered amounts.

Input tax credit on GST paid for canteen services is available where the employer is under a statutory obligation to provide the facility, but only to the extent the applicant actually bears the cost. For regular employees, the statutory canteen obligation under the Factories Act removes the credit blockage in section 17(5)(b) of the CGST Act, so credit is admissible on the applicant's own share and not on employee recoveries. For contract workers, no employer-employee relationship or statutory obligation was found, so credit is not admissible. The ruling therefore limits credit to statutory canteen actually borne by the applicant.

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Issues: (i) Whether input tax credit of GST charged by the canteen service provider is admissible on catering services provided to regular employees where the canteen is maintained under a statutory obligation; (ii) whether such input tax credit is admissible on canteen services attributable to contract workers; (iii) whether credit is available on the entire value charged by the canteen service provider or only to the extent of the cost actually borne by the applicant.

Issue (i): Whether input tax credit of GST charged by the canteen service provider is admissible on catering services provided to regular employees where the canteen is maintained under a statutory obligation.

Analysis: The proviso to Section 17(5)(b) of the Central Goods and Services Tax Act, 2017 removes the blockage on credit where the inward supply is obligatory for an employer to provide under any law. The canteen facility was held to be a statutory requirement under Section 46 of the Factories Act, 1948, and the recovery from employees was treated as incidental and subsidised. The cited circular and rate notification were also relied upon in support of admissibility.

Conclusion: Input tax credit is admissible in respect of canteen services provided to regular employees, but only to the extent of the cost actually borne by the applicant.

Issue (ii): Whether such input tax credit is admissible on canteen services attributable to contract workers.

Analysis: The applicant was found to have no direct employer-employee relationship with contract workers, and no statutory obligation under the Factories Act, 1948 to provide canteen facilities to them. The exception in the proviso to Section 17(5)(b) of the Central Goods and Services Tax Act, 2017 therefore did not apply, and the inward supply was not treated as one used for making an outward taxable supply of the same category.

Conclusion: Input tax credit on canteen services attributable to contract workers is not admissible.

Issue (iii): Whether input tax credit is available on the entire value charged by the canteen service provider or only to the extent of the cost actually borne by the applicant.

Analysis: The ruling applied the statutory-obligation exception only to the extent of actual expenditure incurred by the applicant in discharging that obligation. Amounts recovered from employees were treated as not borne by the applicant, so credit on that recovered portion was disallowed.

Conclusion: Input tax credit is restricted to the portion of canteen cost actually borne by the applicant, and is not available on the recovered portion.

Final Conclusion: The ruling grants credit for statutory canteen services for regular employees only to the extent of the applicant's own cost and denies credit for services attributable to contract workers, leaving the relief partly in favour of the applicant.

Ratio Decidendi: Credit on blocked food and catering services is available only where a statutory obligation exists, and then only to the extent the registered person actually bears the cost of the inward supply.

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