RESTAURANT SERVICES

[SOPL SOPL]

Dear Sir/Madam

We are facilitating hotel accommodation services to our clients.First hotel raise invoice on our entity.Later we raise invoice on our client after adding some service charges.

In the hotel bill they charge for both food and accommodation.For accommodation hotel charges @ 12% and for food and beverages it charges @ 5%.

We are invoicing to our client with two line items , one for accommodation(including service charge) @ 12% and other for food charges @ 5% (including service charge).

Our query:

Whether we can claim input on food charges as it is covered under further supply as per proviso to section 17(5) clause (b).As per our understanding we are in trading of services.

Gst rate notification says input tax credit on goods and services is not allowed if gst is charged @ 5%.

Can a notification override Act ? Because act allows input in case of further supply.

We believe that for all the trading transactions input should be allowed.

AI Summary

Input tax credit restriction on lower rated restaurant supplies may bar credit unless composite supply classification applies.
Whether input tax credit (ITC) is available on food and beverage charges when an intermediary facilitates hotel accommodation with food. Some contributors state that ITC is barred where restaurant services are taxed at the lower restaurant rate under the GST rate notification; another view argues that when accommodation and food form a composite or further supply and the inward supply is used to make an outward taxable composite supply, the proviso to the ITC rule permits credit. Responses advise taxing accommodation and food on the outward invoice as done and note practical divergence and an anomaly under current notifications.