ITC available on Food and Beverages as Canteen Facilities is Obligatory under Factories Act: AAR [Read Order]

The Gujarat Authority of Advance Ruling (AAR) has ruled that Input Tax Credit (ITC) will be available to the appellant in respect of food and beverages as the canteen facility is obligatory to be provided under the Factories Act, 1948, read with Gujarat Factories Rules, 1963.

Alleima India Private Limited, the applicant is engaged in the business of manufacturing and selling seamless stainless steel pipes and tubes along with high-resistance wires. They also rendered R&D services. The applicant states that they have employed more than 300 employees and are also registered under the Factories Act, 1948.

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The issue was whether the deduction of a nominal amount by the applicant from the salary of the employees who are availing of the facility of food provided in the factory premises would be considered a “supply of service” by the applicant under the provisions of Section 7 of the Central Goods and Service Tax Act, 2017 and the Gujarat Goods and Service Tax Act, 2017.

Also raised the question whether ITC, to the extent of the cost borne by the applicant, is available to the applicant on GST charged by the canteen service provider for providing the catering services.

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The ruling authority held that the deduction of a nominal amount made by the applicant from the salary of the employees who are availing of the facility of food provided in the factory premises would not be considered a ‘supply’ under the provisions of Section 7 of the CGST Act, 2017.

The two-member bench of Amit Kumar Mishra and Milind Kavatkar has observed that the applicants employ more than 300 employees who have been provided with canteen facilities in terms of Section 46 of the Factories Act, 1948.

It was ruled that input tax credit (ITC) will be available to the applicant on GST charged by the service provider in respect of the canteen facility provided to its employees working in their factory as it was obligatory under the Factories Act, 1948, read with Gujarat Factories Rules, 1963.

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