canteen ITC
Query (Issue) Started By: – Madhavan iyengar Dated:- 11-1-2019 Last Reply Date:- 17-1-2019 Goods and Services Tax – GST
Got 6 Replies
GST
In case of a company which has provided a canteen facility ( ie eating place) with food served by caterer.
First Scenario
Caterer has following billing pattern he charges 5% GST. Company recovers part amount from employee
Issue: Whether Company can discharge GST on recovered amount from employee @5% or company has to discharge gst on full value of canteen bill
will valuation rule come into play since employer and employee are related party
Second scenario: Caterer charges 18% GST and Company discharges gst @18% on the entire canteen bill ( company recovers only part amount from employee)
in above case can company claim the itc of canteen ??? will it fall under the exception to sec 17(5) ie like supplies
Reply By Natarajan Ramakrishnan:
The Reply:
Dear Mr Madhavan,
As pointed out the employer and employee are related
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iyengar:
The Reply:
thanks for your reply following clarifications required
a) what you are saying is GST is required to be paid whether there is part recovery / full recovery from employees for canteen and GST is required to be paid on the entire canteen bill ie the market value.
b) sec 17(5)(b) – credit is not allowed for out door catering except when an inward supply of goods or services
(b) the following supply of goods or services or both-
(i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery except where an inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply;
if u see above extract if canteen service provider has charged gst 18% and company has discharged 18% gst from employees for canteen services provided then will it not fall in
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ther such supplies has to be treated as exempt supply for the purpose of Rule 42, 43 calculation. i.e. apportionment of common credits of taxable, exempted supply.
Summarised –
Sl.No
Particulars
Till 14.11.17
from 15-11-17 to 25-07-18
from 26-07-18
A
For third party caterers
18%
18%
5%
B
Whether above (A) ITC eligible for Company
Yes
Yes – depends on tax rate opted by the company on its outward supply.
No
C
Employer – Canteen services liability
12%
5% without ITC
18% with ITC
5% without ITC
D
Should include in exempt TO
No
Yes/No
Yes
E
Rule 42 applicability
No
Yes, if 5% option opted. All the common credits would be reversed in proportion to 5% without ITC supply
Yes. All the common credits would be reversed in proportion to 5% without ITC supply
F
Cost to Company
–
Depends
10% and reversal of common ITC.
Reply By KASTURI SETHI:
The Reply:
Dear Sh.Spudarjunan S.,. In view of the substance and clarity in your reply, I would not hesitate to say tha
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