Canteen service provided under factories Act

[Yatin Bhopi]

Dear expert

We are providing canteen service in the factory which is mandatory under factories Act.

1. Our canteen contractor is charging monthly bill on the company @18%

2. We recover some nominal charges from every employee

3. We are paying GST on recoveries made from employees

Whether ITC is available on GST charged by canteen contractor?

[Rajagopalan Ranganathan]

Sir,

Provision of canteen services by you is mandatory under Factories Act. Proviso 2 of Section 17 (5) (b) of CGST Acts provides that the input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force. Therefore you are eligible to take ITC of the tax paid by your contractor. You can utilize the credit for payment of tax on charges collected by you from your employees. If you have excess credit after payment of tax on charges collected from your employee the same will lapse.

[PAWAN KUMAR]

Dear Sir,

As per my view, itc will not be admissible since goods or services as per section 17 (5)(b)(i) of CGST Act, 2017.

[Ganeshan Kalyani]

Sir, as per explanation to Sec.17(5)(b), ITC is eligible.

"Provided that the input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force."

AI Summary

Input tax credit available for mandatory employer provided canteen services; credit may offset tax on employee recoveries.
Where an employer is legally required to provide canteen services to employees, the GST paid on those services from a contractor qualifies as input tax credit under the proviso to section 17(5)(b) of the CGST Act; the employer may apply that credit against tax on nominal charges recovered from employees, and any excess credit after such application will lapse.