ITC on canteen, Goods and Services Tax - GST

[Shankar Nayakar]

Dear sir,

we are manufacturing co. and having canteen facility also in co. premises.

third party is cooking here and raise invoice with GST to us., we are paying him with GST.

however company is charging nominal fee from employees.

in this scenario, ITC is eligible or not?

Posts / Replies

[Alkesh Jani]

Sir, In my point of view ITC is not available.

[Alkesh Jani]

Sir, Please refer Section 17(5) of CGST Act, 2017. Moreover, it has no nexus with the business or furtherance of business.

[Shankar Nayakar]

sir, please refer attached copy of AAR, where it is stated that in GST Scenario, providing of canteen service is called as "outward supply"

http://keralataxes.gov.in/wp-content/uploads/2018/04/C3.531.18_Canteen_Services.pdf

kindly inform, can we avail ITC on that in GST scenario?

[Ganeshan Kalyani]

GST is payable on the amount recovered from the employee as it amounts to outward supply.

[Shankar Nayakar]

Cannot we avail ITC against disbursement to to third party ?

company is charging from employee concessional rate only.

[Ganeshan Kalyani]

Outdoor catering service is included in the negative list given u/s 17 (5) of CGST Act. Credit is not allowed.

[KASTURI SETHI]

I endorse the views of both experts.

[Susheel Gupta]

Dear Shankar

In my view ITC can be availed, since as per section 17(5)(b)(i), if food and beverage is used for making output taxable supply of same category ITC is available.

Also note that, since the employer and employee are related parties, GST in respect of supply made to employees shall be as per valuation rules and not the amount charged from employees.

Regards

CA Susheel Gupta

8510081001, 9811004443

[KASTURI SETHI]

Valuation under Valuation Rules has to be determined, if an assessee is unable to determine valuation under the Act due to various factors. Rules are not preferred to the Act. Rules are meant for "help" Rules cannot override the Act.

[subramanian vijayakumar]

I endorse sethi ji view he can not claim and avail ITC

It is outdoor catering

[KASTURI SETHI]

ITC in respect of 'Catering (Food and Beverage etc) & 'Works Contract Service' on the same taxable output service is virtually denied.

[CASusheel Gupta]

Issue – Valuation as per Act/Rules

Section 15 (1) on valuation states - The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply

This sub section is applicable when price paid or payable is the sole consideration and the two parties are not related parties.

Price means monetary consideration only

Employer and employee are related parties

Sub section (4) provides that “where the value of the supply of goods or services or both cannot be determined under sub-section (1), the same shall be determined in such manner as may be prescribed’

Since the Employer and employee are related parties we have to refer to rules and have no other option.

Issue – Whether ITC of food and beverage is allowed or not, if allowed in which case

Section 17(5)(b)(i) denies ITC but at the same time gives one exception when ITC can be availed It states “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”.

We need to read the exception which allows ITC where inward supply of food and beverages, outdoor catering are used for making outward supply. As such where a banquet hall, sub contracts supply of food and sub-contractor charges GST, the banquet hall can take input.

But the restriction has been put by notification 11/2017, where caterer is charging GST @ 5% he cannot take ITC. Even a caterer can take input if he is charging 18%.

Comments of experts are welcome.

[Himansu Sekhar]

Value addition is not a factor to determine the ITC. No where it has been mentioned. The requirement of the Law has to be observed to get the benefits of ITC. The credit is not allowable when specifically barred under Sec. 11(5).

[JAIPRAKASH RUIA]

Humbly but Surprisingly, when Mr. Sushil Gupta is raising some points clearly producing the provision of the act and rule, most of the expert preferring to give verdict without healthy and point to point discussion.

Mr. Gupta has raised some valid questions to be replied today or tomorrow. Food and Beverage , Outdoor catering, and restaurant service are three separate goods and services and should be dealt separately and should not be clubbed while referring act and rules.

There may be different scenario with different treatment for taxation of gst.

Like full/part amount recovered by employee, amount not recovered by employee, in some of them outsiders also allowed to eat in canteen alongwith employees.

[KASTURI SETHI]

Dear Sir, Experts give their opinions and not verdict. Nobody is perfect. Experts often request intervention of others in complicated issues. Sometimes one expert gives one's opinion on the issue and another expert posts legal force by way of incorporating Sections, Acts, Circulars, case laws, notifications etc. Thus reply becomes complete. Every expert is busy and they devote their valuable time as per their knowledge and experience in respective field of taxation. Due to paucity of time sometimes an expert gives reply in brevity which also serves purpose. When all the experts contribute profusely, the querist gets a very clear picture of the issue. All experts welcome the views of others wherever any expert gives perfect reply. We are thankful to TMI for according such a useful platform where we can express our views based on knowledge, education, and experience and the same are perused by various persons (unlimited number of visitors of this site) not only in India but also abroad.

[JAIPRAKASH RUIA]

Sir, I have high regards for all the experts. I am sorry if I have hurt some one, my intention was not that but to raise the standard of this august platform with it's democratic character.

[uday kumar]

Sir,

I am in consonance with the expert's view that credit is not admissblad, not withstanding that the service is utilised in the course of furtherance of business, for the reason that outdoor catering service stands specifically excluded for purposes of availment of credit since Section 17(5) is abundantly clear on the issue and does not warrant any ambiguity. Section is the law per se and when the law explicitly excludes a particular service, there cannot be any ambiguity in the matter.

However, if it is canteen services rendered to the assessee, then the matter calls for further detailed examination in the light of the recently reported AAR of GST, Kerala.

This is my view. However there could be more learned persons whose perception might be different.

K.N.Udaykumar, IRS(Retd.)

Consultant in GST/Customs/DGFT Matters.

[KASTURI SETHI]

Now a days AAR decision cannot become basis. There are inconsistencies in various decisions of States. One cannot take shelter legally.

[KASTURI SETHI]

Every State AAR is giving its own decision on complicated issues/disputed issues even on classification matters. Too many cooks spoil the broth.

There should be only one AAR.

[Rakesh Chitkara]

Reply No.14 / 30 April by Hon'ble Mr Jaiprakash ji Ruia : Emplying the word HEALTHY : Unable to fathom usage in that sentence. Will he kindly elaborate the intent and meaning behind using this word ?

I tried raising standard of debate but failed. Did the next best thing : raised the level of table. Will that suffice Sir ?

[JAIPRAKASH RUIA]

I Apologize to experts. The only intention of the post was that learners like me learn lot of thing from what experts post giving their valuable time and a detailed discussion add experience to us.We know that expert like you get very less time to communicate on such platform but still we expect that you all shower your knowledge and experience. Sir, You have a rich experience in Indirect taxation, I request you to be more active on discussion board and provide guidance to us. I also want to learn from my mistakes and assure to improve myself.

[KASTURI SETHI]

Sh.Jaiprakash Ji, . I agree with your views. This forum is read by so many legal luminaries. We are to learn from them. While choosing the words for this forum, we have to be very very careful.

[YAGAY and SUN]

We do agree with the concern as raised by Kasturi Sir that there should be on AAR.

GST: Govt to bring Centralized Authority for Advance Rulings http://www.taxscan.in/gst-authority-advance-rulings/24244/

[VaibhavKumar Jain]

Since you are recovering certain amount from employees, it amounts to supply and accordingly GST is liable to pay by you. The employee and employer are related party, under valuation rule, the value of supply is the value paid by you to the canteen contractor.

Since, you are the recipient and simultaneously providing canteen service, you can avail ITC on payment made to canteen contractor. The same ITC shall be utilized against your out put liability of canteen service only.

Finally, your GST liability shall be nil as the value of input service and outward supplies are same. However, you will show in your GSTR -1 as outward supplies and also ITC on your GSTR -3B and fully off set of ITC without further GST payment.

Gopabandhu

[Raghunath Gadre]

HI,

From July 2018 (Notification 13/2018 dt. 26/7/2018) Canteen contractor will charge 5% GST in his bill,

You can claim Input credit of the same.

You have to also discharge GST on RCM on fair market value of food supplied to your employee