GST on Canteen Recovery from Employees

Case Details: Carraro India (P.) Ltd., In re [2026] 185 taxmann.com 253 (AAR-MAHARASHTRA)

Judiciary and Counsel Details

D.P. Gojamgunde & Ms Himani Dhamija, Member

Facts of the Case

The applicant operated a factory employing approximately 900 workers and maintained a statutory canteen facility in compliance with Section 46 of the Factories Act, 1948. For this purpose, a third-party contractor was engaged, who supplied ready-to-eat meals within the factory premises and raised GST invoices upon the applicant, which were duly paid. The applicant recovered a fixed nominal amount from employees through salary deductions. It was submitted that no direct contractual relationship existed between the contractor and employees, and the recovery was only partial reimbursement. It was further contended that GST should not apply on the subsidised portion borne by it and that input tax credit (ITC) should be available as the provision of canteen facility was statutorily mandated. The matter was accordingly placed before the Authority for Advance Ruling (AAR).

AAR Held

The AAR held that the arrangement constituted two distinct supplies, one from the contractor to the applicant and another from the applicant to its employees, and that recovery from employees represented consideration for supply in the course or furtherance of business under Section 7 read with Section 9 of the CGST Act and Maharashtra GST Act. It was held that GST was leviable only on the amount recovered from employees, whereas the subsidized portion borne by the applicant qualified as a perquisite and was not taxable. On the issue of ITC, It was held with reference to Section 16 and Section 17(5) that although provision of canteen facility was obligatory under law, the contractor supplied services taxable at concessional rate which imposed a restriction on ITC, thereby barring the applicant from availing credit irrespective of statutory obligation or mode of operation of canteen. It was further held that such deductions did not qualify as supply.

List of Cases Reviewed

M/s Hindustan Coca Cola Beverages Pvt. Ltd. v/s CCE, Nashik (para 5.5.9)
Cema Electric Lighting Products India Private Limited v. CCE 2015 (37) STR 718 (Guj.) (para 5.5.9)
Cinemax India Limited v. Union of India MANU/GJ/1053/2011(para 5.5.9)
Indian Institute of Technology v. State of Uttar Pradesh & Ors. (para 5.5.9) distinguished

List of Cases Referred to

North Shore Technologies (P.) Ltd., In re [2021] 125 taxmann.com 363/85 GST 512/49 GSTL 315 (AAR – Uttar Pradesh)) (para 2.10)
SRF Ltd., In re [2022] 145 taxmann.com 3 (AAR – Gujarat) (para 2.11)
Zydus Lifesciences Ltd., In re [2022] 143 taxmann.com 346 (AAR – Gujarat) (para 2.11)
Jotun India (P.) Ltd., In re [2019] 110 taxmann.com 184/29 GSTL 778/76 GST 691 (AAR – Maharashtra) (para 2.18)
Posco India Pune Processing Center (P.) Ltd., In re [2019] 102 taxmann.com 21/21 GSTL 351 (AAR – Maharashtra) (para 2.18)
Bai Mamubai Trust v. Suchitra [2019] 109 taxmann.com 200/31 GSTL 193 (Bombay) (para 2.28)
Cinemax India Ltd. v. Union of India [2011] 12 taxmann.com 492 (Gujarat) (para 2.30)
Indian Institute of Technology v. State of Uttar Pradesh 2006 taxmann.com 3023 (Allahabad) (para 2.32)
Cema Electric Lighting Products India P. Ltd. v. CCE [2014] 48 taxmann.com 232/47 GST 189 (Gujarat) (para 2.34)
Hindustan Coca Cola Beverages (P.) Ltd. v. CCE 2015 (38) S.T.R. 129 (Tri. – Mumbai) (para 2.34)
Tata Motors Ltd., In re [GST-ARA-23-2019-20/B-46, dated 25-8-2020] (para 2.35)
Amneal Pharmaceuticals (P.) Ltd., In re [2021] 126 taxmann.com 228/[2022] 58 GSTL 382 (AAAR-Gujarat) (para 2.9)
Caltech Polymers (P.) Ltd., In re [2018] 98 taxmann.com 355/70 GST 582 (AAAR – Kerala) (para 3.3)
Caltech Polymers (P.) Ltd., In re [2018] 92 taxmann.com 142/67 GST 95 (AAR – Kerala) (para 3.3)
Federal Mogul Goetze India Ltd. In re [2023] 148 taxmann.com 165 (AAR – Karnataka) (para 3.5)
Mfar Hotels & Resorts Pvt. Ltd. [2020] 120 taxmann.com 442/42 GSTL 470 (AAR – Tamilnadu) (para 5.4.4)
Musashi Auto Parts (P.) Ltd., In re [2021] 124 taxmann.com 87 (AAR – Haryana) (para 5.4.4).