ITC on Canteen Facility Available for Direct Employees Only: Uttar Pradesh AAR

The applicant, M/s Elentec India Private Limited, maintains a canteen facility in three factory places as required under Section 46 of the Factories Act, 1948 and Rule 68 of the Uttar Pradesh Factories Rules, 1950. The applicant submitted an application before the Uttar Pradesh AAR seeking an advance ruling on the following questions:

“a. Whether input tax credit (ITC) available to Elentec India Private Limited of GST charged by service provider on canteen facility provided to employees working in the factory?

b. If ITC is available as per question no. (1) above, then this will be available for the factory’s Direct Employees (ON ROLL employees) only or this will be available for Contractual Employees (OFF ROLL employees) also?”

The applicant cited section 17(5(b) of the CGST Act, 2017, that says GST ITC is available on goods and services or both if it is obligatory for an employer to provide under any law. In this case, the canteen service is mandatory under the Factories Act. The applicant also cited CBIC circular No. 172/04/2022-GST dated 06.07.2022, which clarifies that the provisions after sub-clause (iii) of clause (b) of sub-section (5) of section 17 of the CGST Act are applicable to the clause (b) of sub-section (5) of section 17 of the CGST Act.

As per the Uttar Pradesh Authority for Advance Ruling:

• GST ITC is available for the GST paid on the canteen facility provided to the employees of the company, if the GST is not passed on to such employees.
• The GST ITC is also available for the Direct Employees of the factory. However, it is not available for the Contractual employees.