We intend to update you on issue of availability of ITC on canteen facility provided to contractual workers at par with employees.

Section 17(5)(b) of the CGST Act allows ITC on food, beverages and outdoor catering services when provided by an employer to its employees under mandate of any legislation.

Pertinently, the Factories Act, 1948 (‘Factories Act’) mandates an employer having workforce of more than 250 workers to provide food and catering services to its workers. Accordingly, in terms of the proviso, ITC on expenses shall be allowed to employer. In the recent ruling of Troikaa Pharmaceuticals Limited, 2022-VIL-231-AAR, the Authority for Advance Ruling denied ITC to the extent such expenses related to contractual workers on the ground that ITC is available only when services are provided to employees and not contractual labour.

 NITYA Comments: A bare perusal of aforesaid provision indicates that facilities provided to ‘employees’ are eligible for ITC. Here, it is relevant to note that the Factories Act does not use expression ‘employee’. The Factories Act defines ‘worker’ to mean a person employed directly or by or through any agency. Hence, where mandate of provision of food is taken from the Factories Act, then the term ‘employee’ in the CGST Act should be interpreted in context of the Factories Act only. Basis above, ITC is available even in respect of contractual workers.

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