The Gujarat Authority of Advance Ruling (AAR) has ruled that Input Tax Credit (ITC) available on canteen services for factory employees, which is limited to employer’s cost share.
The bench of P.B. Meena and Kamal Shukla has observed that Input Tax Credit (ITC) will be available to the applicant on GST charged by the service provider in respect of canteen facility provided to its direct employees working in their factory which is restricted to the extent of the cost borne by the applicant for providing canteen services to its direct employees, but disallowing proportionate credit to the extent embedded in the cost of goods recovered from such employees.
The applicant, Amneal Pharmaceuticals Private Limited provides a canteen facility to its employees at their Bavla factory. The primary reasoning for provision of the aforementioned facility is that in terms of section 46 of the Factories Act, 1948, read with rule 72 of Gujarat factories rule, 1963, they are mandated to provide and maintain canteen for their employees.
The applicant has entered into an agreement with a canteen service provider (CSP) for provision of canteen facilities for their employees. As per the agreement, the CSP prepares the food for the employees at the factory and serves the same. The CSP raises invoices along with applicable GST (if registered) for its canteen services. The invoices are based on the consumption of dishes served to the employees, availing the canteen facility. The employees bear proportionate canteen charges while the remaining charges are borne by the applicant. The applicant claims that the amount collected from the employees is without any commercial objective/without profit margin and is remitted to CSP.
The applicant sought the advance ruling on the issue whether the Company is eligible to take the input tax credit for the GST charged by the canteen service provider for the canteen services (on the portion which is borne by the company) for its employees where the canteen facility is mandatory in terms of section 46 of the Factories Act, 1948 read with rule 72 of Gujarat Factories rules, 1963.
The AAR held that Input Tax Credit will be available to the applicant in respect of food and beverages as canteen facility is obligatorily to be provided under the Factories Act, 1948, read with Gujarat Factories Rules, 1963 as far as provision of canteen service for employees working at the factory is concerned. The ITC on GST charged by the canteen service provider will be restricted to the extent of cost borne by the applicant only.
Ruling Details
Applicant Name: M/s. Amneal Pharmaceuticals Pvt. Limited
Date: 21/03/2025
