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2022 (12) TMI 1363 - AAAR - GSTInput Tax Credit - GST charged by service provider on canteen facility provided to employees working in factory - Whether ITC will be restricted to the extent of cost borne by the Applicant (employer)? - HELD THAT:- As second proviso to Section 17(5)(b) inserted vide CGST Amendment Act, 2018 effective from 1.2.2019, is applicable to the whole of clause (b) of sub-section (5) of Section 17 of the CGST Act, Input Tax Credit will be available to the appellant in respect of food & beverages as canteen facility, is obligatorily to be provided under the Factories Act, 1948, to its employees working in the factory. Input Tax Credit will be available in respect of such services provided by canteen facility to its direct employees but not in respect of other type of employees including contract employees/workers, visitors etc. The appellant also raised the question if ITC is available on GST charged by the service provider on canteen facility provided to its employees working in their factory, whether it will be restricted to the extent of cost borne by the appellant. In this regard we find that the authorized representative of the appellant during the course of personal hearing had submitted that they will not take input tax credit to the extent applicable on the amount of canteen charges recovered from their employees and will reverse the credit to that extent. Further vide their dated 12.09.2022 they submitted that they have been discharging GST on the canteen charges recovered from contract employees and they have requested to allow the ITC on GST charged by the service provider on canteen facility provided to employees working their factory to the extent of cost suffered by the appellant. Reliance placed upon the judgment of Hon'ble High Court of Bombay in the case of Commissioner of Central Excise, Nagpur Versus Ultratech Cement Ltd., [2010 (10) TMI 13 - BOMBAY HIGH COURT] wherein it was held that “Once the service tax is borne by the ultimate consumer of the service, namely the worker, the manufacturer cannot take credit of that part of the service tax which is borne by the consumer.” The judgement was in context as to whether manufacturer can avail credit of Service Tax in cases where the cost of the food is borne by the worker - the ITC on GST charged by the canteen service provider will be available only to the extent of cost borne by the appellant, for providing the canteen services only to its direct employees.
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