Tata Motors Ltd ., In re

M/s Tata Motors Limited (the Appellant) filed an appeal against an Advance Ruling that denied them Input Tax Credit (ITC) on GST charged by a service provider for a canteen facility. The company provides this canteen service to its employees to comply with the mandatory requirements of the Factories Act, 1948. The company recovers a nominal amount from its employees for this service.

The Gujarat Authority for Advance Ruling (GAAR) had previously ruled that ITC was blocked under Section 17(5)(b)(i) of the CGST Act. The GAAR's reasoning was based on a strict interpretation of punctuation, concluding that the proviso allowing ITC for obligatory services was only linked to Section 17(5)(b)(iii) (travel benefits), not to the canteen services listed under Section 17(5)(b)(i). The GAAR also held that GST was not leviable on the nominal amount recovered from employees for the canteen facility.

The appellant argued that the GAAR's interpretation of the punctuation was incorrect and would render parts of the law redundant. It cited the legislative intent to widen the scope of ITC, as highlighted in a Press Note from the 28th GST Council Meeting, and pointed to the mandatory nature of providing a canteen under the Factories Act. The appellant also brought to attention Circular No. 172/04/2022-GST dated July 6, 2022, which clarified that the proviso applies to the whole of Section 17(5)(b).

The Gujarat Appellate Authority for Advance Ruling (AAAR) modified the original advance ruling. It agreed with the appellant that the proviso allowing ITC for obligatory services is applicable to the entire Section 17(5)(b).

• The AAAR ruled that ITC on GST paid for canteen facilities is available to the appellant for its direct employees, as providing this facility is an obligation under Section 46 of the Factories Act, 1948.

• However, the AAAR also held that the ITC is restricted to the extent of the cost borne by the employer. The portion of the cost recovered from the employees is considered a cost to the employee, and therefore, the ITC on that portion is not available to the company. The AAAR relied on the Bombay High Court's judgment in Commissioner of Central Excise, Nagpur vs. Ultratech Cement Ltd. to support this principle.