GST on amount recovered from employees towards canteen services and admissibility of ITC on the GST charged by the Canteen Contractor

M/s. Tube Investment of India Limited [AAR Uttarakhand]

Held: It has been established that the supply of food in the canteens are 'Supply of Service' by the applicant. The third party vendor has entered into agreement with the applicant for running of canteen in their unit and is paid service charges which is a supply made by the third-party-vendor to the applicant. The supply of food by the employer, i.e. the applicant to their employees is composite supply of food held as 'Supply of service' as per Schedule-II of the GST Act and the amount collected by the applicant is a 'Consideration' on which GST is liable to be paid.

With regard to the eligibility of ITC on the GST paid by the applicant on the services of canteen services by the canteen service provider, we observe that the ITC on GST paid on Canteen Facility is barred credit u/s 17(5)(b)(i) of the CGST Act, 2017 and hence inadmissible. We observe that two clauses in Section 17(5)(b)(i) and 17(5)(b)(iii) of the CGST Act, which governs the supply of goods and services, are not related by the punctuation used at the end of the provisions. “Colons and semicolons are two types of punctuation,” according to the concept, and “Semicolons are used to unite two independent clauses/sub clauses, or two complete thoughts that might stand alone as entire sentences.” Hence it can be said that ITC is not allowed on canteen charges even though it is obligatory under any other law.