AAR Rules GST Credit on Mandatory Canteen Services is Legal, But It's Only for Direct Employees [Read Order]

The article summarises an Authority for Advance Ruling (AAR) decision on whether GST credit (input tax credit) is admissible for mandatory canteen services provided by an employer. The AAR analysed whether the canteen service qualifies as a supply for business purposes when it is mandated by contract or law, and whether the recipient is in the course or furtherance of business such that ITC may be claimed. The ruling distinguished between direct employees and other categories, holding that ITC may be available only to the business in respect of canteen services provided to its direct employees (who form part of the consideration for the employer’s business), and not for services supplied to non-direct recipients or where the nature of supply does not amount to a business input. The decision explored relevant GST provisions, the concept of “business” and “supply,” and the conditions under which in-house or contracted canteen services can be treated as recoverable inputs, thereby narrowing the scope of ITC in such employment-related contexts.