Obligatory Under Any Law explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Most of clause (b) is an absolute block. One sentence at the end of it is not.
"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." Because of its placement at the end of clause (b), after sub-clause (iii), it applies to the whole of clause (b) — food and beverages, catering, health services, vehicle hire, life and health insurance, club membership, and travel benefits. The test has three parts: a legal obligation, on the employer, to provide it to its employees.
The three-part test
1. Obligatory under a law for the time being in force.
A statute, a rule made under a statute, or a notification with statutory force. Not a contract, not a policy, not an industry norm, not a group standard.
2. On the employer.
The obligation must bind the employer in that capacity. A duty imposed on the employee, or on a third party, does not engage the proviso.
3. To provide the same to its employees.
The obligation must be to provide that thing — the canteen, the transport, the insurance — to employees. An obligation to maintain a general facility is weaker.
The obligations that qualify
Canteen — section 46, Factories Act, 1948. A canteen is required in a factory employing more than 250 workers, where the State Government so prescribes by rules. This is the most commonly relied-on obligation, and it is conditional on being a factory, on the worker count, and on the State having made the rules.
An office employing 400 people is not a factory. A factory employing 180 workers is below the threshold.
Transport for women employees on night shifts. Several States require employers to provide transport where women work between specified night hours — under State Shops and Establishments legislation, Factories Act rules, or specific notifications. Where such a rule applies, the credit on that transport is available. Leasing, renting and hiring →
Occupational health services. Where a factory rule or a hazardous-process regulation requires periodic medical examination of workers, the health service is obligatory.
Creche facilities — section 11A, Maternity Benefit Act, 1961. An establishment with 50 or more employees must have a creche facility. Where the creche involves catering or health services, the proviso reaches them.
Employees' compensation and statutory insurance. Where a statute compels the employer to insure — for example under the Employees' Compensation Act, 1923, or a State rule requiring group personal accident cover for specified work — the insurance is obligatory.
Contract labour welfare facilities. The Contract Labour (Regulation and Abolition) Act, 1970 and its rules require canteens, restrooms and drinking water where prescribed thresholds are met.
What does not qualify
- A clause in the employment contract promising subsidised meals, transport or insurance.
- A group HR policy, however uniformly applied.
- A customer's contractual requirement — a client insisting that the vendor's staff be insured.
- A voluntary group mediclaim offered as a benefit.
- A recommendation in a code of practice or an advisory.
- An obligation on a contractor where the credit is claimed by the principal, or vice versa — the obligation must bind the person claiming the credit.
The dividing line is whether an inspector could prosecute for failing to provide it. If not, it is not obligatory under law.
The extent of the credit follows the extent of the obligation
This is where most claims are over-stated.
Section 46 of the Factories Act requires a canteen for the workers of the factory. It does not require:
- meals for visitors and clients;
- catering for a management offsite;
- a separate executive dining room;
- meals at non-factory locations — a corporate office, a sales branch;
- food for contractor staff where the obligation does not extend to them.
A single canteen contract covering all of these needs to be apportioned, and only the obligatory portion supports credit.
Similarly, where a State rule requires night transport for women employees between 8 pm and 6 am, credit is available for that transport — not for the general employee cab service running at 6 pm.
Documentation
- Identify the statute, section and rule relied on, with the State notification where applicable.
- Evidence the threshold — worker count for the Factories Act canteen, employee count for the creche, shift timings for night transport.
- Map the invoice to the obligation. A vendor invoice for "canteen services" covering both the factory canteen and the head office pantry supports credit only in part.
- Keep the apportionment working, updated annually.
- Watch threshold changes. A factory whose worker count falls below 250 loses the obligation prospectively, and with it the credit.
- Where a State rule is relied on, keep a copy — officers in other States will not be familiar with it.
Key takeaways
- The proviso sits at the end of clause (b) and applies to all three sub-clauses.
- The obligation must be legal, must bind the employer, and must be to provide it to employees.
- Section 46 of the Factories Act (canteen, above 250 workers) is the most common basis.
- State night-transport rules and the Maternity Benefit Act creche requirement also qualify.
- Contracts, policies and client requirements do not qualify.
- Credit extends only as far as the obligation — apportion where the contract covers more.
Read next
- Food, Beverages and Outdoor Catering
- Leasing, Renting and Hiring of Motor Vehicles
- GST on Employee Recoveries
- Blocked ITC Under Section 17(5)
Disclaimer: Positions stated as on 5 September 2026, based on the CGST Act as amended to 31 March 2026 (ICAI Bare Law, 12th edition) and the ICAI Handbook on Blocked Credit under GST (November 2025). Statutory obligations vary by State and establishment type.