TaxTMI 
TaxTMI 
2026 (6) TMI 243
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....cations within the State of Karnataka and employs approximately 1,288 employees across all locations, excluding contract employees. The applicant is registered under the provisions of the Factories Act, 1948. The applicant has engaged Canteen Service Providers (CSPs) for providing food facilities to its employees as well as contract employees at all three locations, through canteen facilities operated within the factory premises. 4. In view of the above facts, the applicant has sought an advance ruling on the following question: (a) Whether input tax credit (ITC) is admissible to the applicant on GST charged by the CSP for providing catering services, which the applicant is mandatorily required to provide under Section 46 of the Factories Act, 1948? 5. ADMISSIBILITY OF THE APPLICATION:- The applicant, under column 13 of the application ARA-01, selected the issue "Admissibility of input tax credit of tax paid or deemed to have been paid", which is covered under Section 97(2) (d) and hence the instant application is admissible. 6. BRIEF FACTS OF THE CASE: The applicant furnishes the following facts relevant to the issue: 6.1 The applicant is registered under the ....
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.... time being in force. Accordingly, the applicant submits that it is eligible to avail input tax credit of the GST charged by the CSP. (vi) The restriction imposed under Section 17(5) of the CGST Act, 2017 is not applicable in the present case, since the canteen facility is provided in discharge of the applicant's statutory obligation under the provisions of the Factories Act, 1948. PERSONAL HEARING PROCEEDINGS HELD ON 16.01.2026 8. M.V. Sridhar, the Authorised Representative of the applicant, appeared for personal hearing held on 16.01.2026 before this Authority and reiterated the submissions and facts as narrated in the application. The applicant also placed reliance on Advance Ruling orders passed on similar issues. FINDINGS & DISCUSSION 9. At the outset we would like to make it clear that the provisions of the CGST Act, 2017 and the KGST Act, 2017 are in pari materia and have the same provisions in like matters and differ from each other only on a few specific provisions. Therefore, unless a mention is particularly made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the KGST Act....
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....on 18, input tax credit shall not be available in respect of the following namely: - (a) Motor vehicle .... (b) the following supply of goods or services or both- (i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) except when used for the purposes specified therein, life insurance and health insurance: Provided that the input tax credit in respect of such goods or services or both shall be available where an inward supply of such goods or services or both is used by a registered persons for making an outward taxable supply of the same category of goods or services or both as an element of a taxable composite or mixed supply; (ii) .. (iii) ... "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." 12.3 Section 46 of the Factories Act, 1948 stipulates as under: "The State Governmen....
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.... invoices on the applicant in respect of catering services provided to both categories of users, namely, regular employees and contract workers. Out of the total cost charged by the CSP, a portion is recovered from regular employees without charging GST, another portion is recovered from contractors of contract workers with applicable GST, and the remaining cost of the canteen services is borne by the applicant. 17. The issue that now arises for consideration is whether the applicant is eligible to avail input tax credit of the GST charged by the CSP in respect of catering services provided to its employees as well as contract workers. 18. Section 17(5)(b) of the CGST Act, 2017 places a restriction on availment of input tax credit in respect of food and beverages, including canteen services. However, the provisos to the said provision clearly stipulates that such restriction shall not apply where 1. It is an obligatory for an employer to provide such service under any law, OR 2. If the inward supply is used for making an outward taxable supply of the same category. 19. Further, the GST rate on catering services is notified under Serial No. 7 (iv) of Notif....
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....l workers remains restricted under Section 17(5)(b) of the CGST Act, 2017 read with Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, as amended. 20.3 Accordingly, ITC is admissible only to the extent of catering services provided to the applicant's regular employees in discharge of statutory obligation, and not in respect of services attributable to contractual workers. 21. The next issue for determination is whether the applicant is eligible to avail input tax credit on the entire amount charged by the CSP in respect of catering services provided to its employees (regular), or only to the extent of the cost actually borne by the applicant. 22. As discussed in the preceding paragraphs, in terms of the proviso to Section 17(5)(b) of the CGST Act, 2017, read with Serial No. 7 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, as amended, and clarified vide Circular No. 172/04/2022-GST dated 06.07.2022, input tax credit in respect of food and beverage services is admissible only where such services are obligatory for an employer to provide to its employees under any law for the time being in force. The admissibility of ITC is, therefore, restricted ....