No ITC on canteen services and business promotion expenses incurred by the company

Last updated: 10 February 2021
Quick Summary
The Haryana AAR ruled that companies cannot claim Input Tax Credit (ITC) on canteen services provided to employees, even if mandated by law, or on expenses for business promotion activities like gifts. Furthermore, the distribution of food coupons to employees, even if partially recovered, is considered a taxable supply, and its value forms part of the caterer's taxable service.

Court :
AAR Haryana

Brief :
The Hon'ble AAR Haryana in M/s. Musashi Auto Parts Pvt. Ltd. [Advance Ruling No. HAR/HAAR/R/2019-20/18 dated February 4, 2020] has held that Input Tax Credit ('ITC') is not available with respect to canteen services provided by the employer to their employees and on business promotion expenses. Further, held that the distribution of food coupons among employees for part consideration will attract tax liability and the coupon value will form part of total taxable value of the service provider i.e., caterer.

Citation :
Advance Ruling No. HAR/HAAR/R/2019-20/18 dated February 4, 2020

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Bimal Jain
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