Order Date – 31 March 2023  

Facts –   

• The Applicant, M/s. AIA Engineering Limited, is engaged in the manufacturing of high chrome grinding media balls and parts of machinery for grinding and crushing. The applicant provides canteen facility to its employees at their Moraiya-Sanand factory in terms of section 46 of the Factories Act, 1948, as they are mandated to provide and maintain canteen for the use of its employees.  
• The applicant has arranged canteen service providers [CSP] on contract basis. The CSP raises invoices along with applicable GST [if registered] for its canteen services . The employees bear 50% canteen charges while the remaining 50% is bome by the applicant on behalf of their employees 

Issue –  

• Whether the canteen facility provided by the applicant is liable to GST?  

Order –  

• The AAR observed that the canteen facility is provided by the applicant as mandated in Section 46 of the Factories Act, 1948 read with the Gujarat Factories Rules, 1963 is concerned; and the applicant has provided a sample photocopy of the appointment letter to their employees.   
• Hence it was held that in terms of Circular No. 172/04/2022-GST the subsidized deduction made by the applicant from the employees who are availing food in the factory would not be considered as a 'supply' under the provisions of section 7 of the CGST Act, 2017.  
• It was also held that Input Tax Credit will be available to the appellant 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 full time/direct employees working on permanent basis at the factory is concerned. It is further held that the ITC on GST charged by the canteen service provider will be restricted to the extent of cost borne by the appellant only.

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