ITC on inputs by Hotel having restaurant also

[IRFAN MALIK]

Query relating to ITC on F&B material purchased by hotel (having restaurant):

I have a hotel with restaurant in its premises. Following are GST sales:-

1. Accommodation with breakfast (package sales) - GST charged by hotel is 12/18%
2. Accommodation with breakfast & lunch/dinner (package sales) - GST charged by hotel is 12/18%
3. Direct restaurant sales - GST charged is 5%

In such case how to claim ITC on F&B item as no ITC is allowed if GST charged is 5% but package sales include breakfast/lunch/dinner & GST charged is 12/18%

my 2nd query is Hotel also provide breakfast,lunch & dinner to its employees (hotel + restaurant staff). Can I claim ITC on inputs for providing food to employees. Food is provided free of cost to employees.

Plz suggest.

thanking in anticipation.

regards

[Spudarjunan S]

Dear Sir,

Reply to Q.1 -

The reply to your Q.1 will have two fragments

(i) In case of your package sale the ITC on food and beverages will be available as there is no restriction under section 17(5) of CGST Act,2017 if you provide the same category of goods or services or both or as an element of a taxable composite or mixed supply. In your case you are providing it as a Composite supply.

(ii) In case of your normal restaurants sales, provided you don't have rooms with per day transaction value more than ₹ 7,500/- you need to discharge GST @ 5% without any ITC and also treat the same as exempt supply for the purpose of Rule 42 & 43 of CGST rules. i.e. reversal of ITC relating to ITC. - refer notification no. 13/2018 CT(R) dated 26.07.2018.

Hence in your case, avail the entire ITC of food and beverages and reverse the ITC related to 5% outward supply based on Rule 42 & 43 of CGST rules.

Reply to Q.2 -

In light of the notification no.13/2018 CT(R) dated 26.07.2018 you have to charge 5% GST on supply of food and beverages services without availing ITC. However, based on the CGST Amendment Act,2018 w.e.f 01.02.2018, you can avail the ITC on such supplies to employees provided the same is mandated under any law in force as on date. (Reason :- Notification can't override the Act)

[Ganeshan Kalyani]

Avail entire credit and then reverse credit proportionate to the outward supply attracting 5% Gst.

AI Summary

Input tax credit on restaurant supplies: credit allowed for composite hotel packages but reversed for reduced-rate restaurant sales. ITC on food and beverages for a hotel with a restaurant depends on supply character: ITC is available for food included as an element of a composite accommodation package, while ITC attributable to standalone reduced-rate restaurant sales must be reversed under the apportionment and reversal mechanism in the GST rules. ITC on employee food is allowable only where the statutory conditions in the Act permit it; notifications cannot override the Act, so take full ITC and reverse the portion attributable to non-creditable outward supplies.