GST on Canteen Recovery from Employees | AAR

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  • Last Updated on 14 April, 2026

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GST canteen recovery 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

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Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied