Input Tax Credit on Outdoor Catering Services

Section 17(5)(b)(i) of CGST Act, clearly specifies that Outdoor catering Services is not eligible for Input Tax Credit by the recipient unless and otherwise the recipient is making an outward taxable supply of the same category of goods or services (i.e.) in this Outdoor Catering Serivces , the relevant Section is appended hereunder

Section 17(5) of CGST Act

“ Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the following, namely:—

 (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; “

In present Scenario Input Tax Credit on Outdoor Catering Services is ineligible by the recipient as per the above section of CGST Act

The Central Goods and Services Tax (Amendment) Bill, 2018

The Central Goods and Services Tax (Amendment) Bill, 2018 was introduced in Lok Sabha by the Minister of Finance, Mr. Piyush Goyal on August 7, 2018. The Bill seeks to amend the Central Goods and Services Tax Act, 2017.  Following are the major amendments in the proposed bills, which was passed in the Lok Sabha on August 9, 2018. It has to be passed in the Upper House (Rajya Sabha), which would be passed in the winter session of Parliament which starts from December 11, 2018 to January 8, 2019. This will be last full fledged session before the 2019 Lok Sabha Polls. Hence it is vital for the Government to pass the pending bills.

• Eligibility for the composition scheme
• Eligibility criteria for suppliers of services
• Reverse charge mechanism
• Furnishing of returns
• Consolidated notes
• Registration
• Compulsory registration
• Multiple registrations
• Transitional input tax credit
• Scope of input tax credit
• Appeals

 The following amendment deals with ITC on Outdoor Catering Services.

Amendment of section 17.

9. In section 17 of the principal Act,

“ (b) the following supply of goods or services or both‑

(i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) except when used for the purposes specified therein, life insurance and health insurance:

Provided that the input tax credit in respect of such goods or services or both shall be available where an inward supply of such goods or services or both 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;

(ii) membership of a club, health and fitness centre; and

(iii) travel benefits extended to employees on vacation such as leave or home travel concession:

Provided that the input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force.”.

It is obligatory on the part of employer to provide Catering Services to employees as per the Factories Act, 1948, if the it employs more than Two Hundred and Fifty Workers. Section 46 has been appended hereunder.

Section 46 of Factories Act, 1948

Canteens.-

(1) The State Government may make rules requiring that in any specified factory wherein more than two hundred and fifty workers are ordinarily employed, a canteen or canteens shall be provided and maintained by the occupier for the use of the workers.

(2) Without prejudice in the generality of the foregoing power, such rules may provide for-

• (a) the date by which such canteen shall be provided;
• (b) the standard in respect of construction, accommodation, furniture and other equipment of the canteen;
• (c) the foodstuffs to be served therein and the charges which may be made therefor;
• (d) the constitution of a managing committee for the canteen and representation of the workers in the management of the canteen;
• (dd) the items of expenditure in the running of the canteen which are not to be taken into account in fixing the cost of foodstuffs and which shall be borne by the employer ;
• (e) the delegation to Chief Inspector subject to such conditions as may be prescribed, of the power to make rules under clause (c).

So, after the bill been passed in Upper House of Parliament, Input Tax Credit on Outdoor Catering Services would be eligible for the recipient for whom it is mandatory to provide canteen facility as per Factories Act, 1948. (i.e. Employs 250 or more workers)