GST-ITC ON HOTEL BILLS

[SAFETAB LIFESCIENCE]

Dear Experts,

Our Company Employees/Directors/Guests are staying at Hotels on official visit.

We are getting Loding and Boarding Bills jointly and sometimes separately.

Sometimes, in other state hotels, they are charges only CGST+SGST through our

GST Number is different from their state. Some hotels giving IGST.

1. Shall we avail ITC of IGST and CGST+SGST ???

2. Shall we avail ITC for Loding amount only or Lodging and boading together. ???

[KASTURI SETHI]

Place of supply is covered under Section 12 (3)(c) of IGST Act, 2017. Only CGST & SGST is to be charged by the owner of Hotel. Service is intangible in nature. Company employee goes to Hotel for stay in a State so service is supplied and consumed in that particular State. How IGST can be charged by Hotel owner ? See Para No.10(C) of Board's Flyer No.21 dated 1.1.18

CHST & SGST should be availed.

[KASTURI SETHI]

In my view, ITC for lodging (temporary stay) only should be availed.

[YAGAY andSUN]

Company can claim ITC on maintenance of Guest House, Transit House and Training Hostels: AAR

The Authority for Advance Ruling (AAR), Odisha has granted a ruling on entitlement to take credit of tax paid on various goods and services used for maintenance of township, guest house, hospital, horticulture maintained by a Company, in its ordinary course of business. The applicants provide townships and colonies near its factories and offices for its employees. It also operates guest houses for a temporary stay of employees and guests. It runs hospitals for its employees. They receive various services of repair and maintenance in the townships, guest houses, hospitals and horticulture which are received as part of its business operations. Such suppliers are also charging GST in their invoices.

The applicants submitted that the management, maintenance, and repair service obtained from the service providers for the running of these establishments has the direct benefit to the business operations of the applicant. Since the services are used in the course of and, also, in furtherance of its business, it is entitled to utilize credit of input tax paid by the service providers for paying output tax on the supplies made by the applicant in terms of section 16 of CGST Act. That the supplies, on which the applicant seeks to take input tax credit, are not blocked in section 17(5) of CGST Act. It was also stated that it would be entitled to take credit of tax paid on works contract service only for activities, for which the expenditure is claimed as revenue expenditure and not capitalized. It would not claim any credit with respect to services for which the expenditure is capitalized. After hearing contentions from both sides, the authority noted that the establishment of hospitals and maintenance thereof may be for discharging the statutory obligation under the ESI Act by the employer, but dispensing medical service to the employees and others is a supply of service by the employer. Such service being nil rated will fall under exempt supplies.

Consequently, the inputs and input services received by the applicant for dispensing the exempt service will not qualify for input tax credit in terms of Section 17 (2) of the OGST/CGST Act. “In the provisions of law, as it stands today, there is no such provision providing for input tax credit in respect of goods and/or services procured by an employer for supply to the employees for discharging any statutory obligation. In the absence of such provisions, input tax credit shall not be available to the applicant in respect of the services and goods procured for maintenance of hospital and pharmacy outlet as per the current provisions in the OGST/CGST Act,” the authority pointed out.

It was further held that establishing, maintaining and furnishing guest houses including landscaping by way of gardening or otherwise is neither a perquisite nor a statutory obligation. “It is purely for providing accommodation service to guests including employees on tour. This is, in fact, a business requirement to maintain such facilities and accordingly, the applicant is entitled to input tax credit of the tax paid on inward supply of input and input services for maintenance of the guest house, transit house, and training hostels, but excluding the food and beverages provided in such establishments.”

[KASTURI SETHI]

M/s. YAGAY AND SUN,

Thank you, Sir. I was in search of this decision of AAR but could not trace out and posted reply on the basis of my memory.

[Alkesh Jani]

Dear Experts,

This discussion is worth to be noted, but to add a small part, that decision of AAR is applicable only to that state and the person who have applied for it. Therefore, based on this, the querist, may filed application for advance ruling and can save themselves from future dispute, which may arise.

Thanks,

With regards,

[KASTURI SETHI]

I agree with Sh.Alkesh Jani Ji. However, M/s. YAGAY and Sun have laid foundation for the querist by posting the order of AAR Odisha. The Querist has got ready made material.

AI Summary

Input tax credit on hotel lodging: CGST/SGST credit applies for temporary stays, while food charges are excluded. Place of supply rules require hotel accommodation consumed within a State to be charged CGST and SGST, making CGST/SGST the appropriate input tax credit heads; temporary lodging for business qualifies for ITC, while food and beverages supplied at such establishments are excluded, and inputs used for exempt supplies (such as nil rated medical services) do not qualify. AAR decisions allowing guest house maintenance credit (excluding food) are fact specific and limited to the applicant and jurisdiction.