Question66:ITC on Canteen Service

We are availing canteen service for our employee under Factory Act.

As specified under section 17(5) (b)(A) CGST Act ITC available if any services are obligatory for an employer to provide its employee under any law for the time being in force.

Please advise for ITC on canteen service.

Answer You are not eligible for ITC on outdoor catering if you are not making the same as taxable supply according to section 17(5)(b) (i). In this sub section there is not any provision that ITC available if any services are obligatory for an employer to provide its employee under any law for the time being in force. This is only in the case ITC of rent-a-cab, life insurance and health insurance

Thus, ITC is not available on outdoor catering.

The above specified section is reproduced below:-

Section 17: Apportionment of credit and blocked credits (Relevant Rules 42 to 43 , Rule 38)

Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the following, namely:'

(b) the following supply of goods or services or both:'
(i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery except where an inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply;
(ii) membership of a club, health and fitness centre;
(iii) rent-a-cab, life insurance and health insurance except where ''

(A) the Government notifies the services which are obligatory for an employer to provide to its employees under any law for the time being in force; or

(B) such inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as part of a taxable composite or mixed supply; and

(iv) travel benefits extended to employees on vacation such as leave or home travel concession; (REPLY dt. 25-02-2018)