ITC eligibility on mandatory facilities for women workers working in factories in night shifts
We intend to apprise you regarding availability of ITC on goods and services mandated to be provided by the employers and recent Government Policies issued in this regard:
- Recently, the Uttar Pradesh Government vide Notification No. 647/XXXVI-3-2022-17(sa)/2022 dated May 27, 2022, introduced a policy wherein employers are mandatorily required to provide facilities like food, free transportation etc. to female workers engaged in night shifts.
- This policy has been brought under the powers entrusted to state governments under the Factories Act, 1948. Similar policies already exist in multiple States (Maharashtra, Haryana, Tamil Nadu, Himachal Pradesh etc.). Further, Madras High Court in the case of Vasantha R. v. UOI, MANU/TN/0549/2000 laid down mandatory regulations to be followed by employers for female workers working in factories in night shifts.
- Under the GST law, ITC is available on all goods and services used for business purposes except ones barred under Section 17(5) of the CGST Act. Section 17(5) inter-alia restricts ITC on food and beverages, outdoor catering, renting, hiring or leasing of motor vehicle unless there is a statutory obligation on an employer to provide them.
- Since under aforesaid policies, employers are mandatorily required to provide food and transportation facilities to female workers, Section 17(5) will not get invoked.
NITYA Comments: It is pertinent to note that in States where no Government policy exists, regulations laid down in Vasantha R. (supra) will apply and employers need to comply with such regulations while engaging women workers in night shifts in factories. Hence, taxpayers can avail ITC to this extent.
Since the above policies are brought under the Factories Act, 1948, benefit will not be available to female workers working in night shifts in establishments other than factories like offices etc.