ITC on Canteen Services by Outsiders

Hello Sir

A Company is receiving Canteen services for which every month paying Rs. 1,00,000+ GST @ 18%

Request you to advise if this inward service is eligible to get ITC

Thanks

Replies (2)
Quick Summary
This discussion explores the eligibility for claiming Input Tax Credit (ITC) on canteen services provided to employees. While generally considered an input service for business purposes, Section 17(5)(ii)(B) of the CGST Act restricts ITC on food and beverages, including canteen services, unless used for specific business purposes. However, if providing canteen services is a legal requirement under acts like the Factory Act 1948 (e.g., for companies with over 250 employees), ITC may be claimable.

To determine if the Company can claim Input Tax Credit (ITC) on the canteen services, let's analyze the scenario:

 Eligibility for ITC As per Section 16 of the CGST Act, 2017, ITC is eligible for:

1. _Business purposes_: Inputs or input services used or intended to be used for business purposes.

 2. _Taxable supplies_: Inputs or input services used to make taxable supplies.

 Canteen Services and ITC Eligibility Canteen services are considered as:

1. _Input services_: Canteen services are input services used for the benefit of employees.

2. _Business purposes_: Providing canteen services is considered a business purpose, as it is for the welfare of employees.

 However, there's a specific restriction: 1. _Restriction under Section 17(5)(ii)(B)_*: ITC is not available for food and beverages, outdoor catering, beauty treatment, health services, and travel benefits to employees, except when these are used for business purposes (e.g., providing food to employees during business meetings).

Conclusion In your case, since the canteen services are provided to employees, ITC might not be eligible under Section 17(5)(ii)(B). However, if you can demonstrate that the canteen services are used for business purposes (e.g., business meetings, client entertainment), you might be eligible to claim ITC. 

ITC is allowed on canteen service bills since canteen is mandatory to be maintained for employees under factory act 1948...
canteen is mandatory if total employees is more than 250...

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