ITC eligibility of restaurant when food is purchased from another restaurant

[ArvindKumar P]

A chain of restaurants has one central kitchen in Pondicherry (close to the Tamilnadu border) for supplying food (in fully cooked and semi-coooked form) to outlets located in Pondicherry. Since one outlet in Tamilnadu is located near the Pondicherry border, food from this main kitchen is also supplied to the outlet in Tamilnadu for which 5% IGST is charged by the Pondicherry Main Kitchen. The outlet located in Tamilnadu receives the food from Pondicherry Main Kitchen and uses it to supply food to end consumers who visit the outler. Can the Tamilnadu outlet avail ITC on the food received from Pondy Main Kitchen since it is being used by it to resupply the same food to end consumers by charging 5% GST?

[Kiran Tahelani]

According to sr. no 7 of the Notification no 11/2017 read with explanation no (iv), ITC is not available to the restaurant service provider.

[Padmanathan KV]

Agree with Ld expert. No ITC can be availed where the food is supplied to customer at 5%.

[Shilpi Jain]

Maybe a representation should be made to the Govt. to enable credit in this regard. Also there is lot of confusion regarding taxability for this industry.

Whether at all the supply made by the Pondicherry unit can be regarded as a restaurant service and so taxing it at 5%?

AI Summary

Input tax credit denial for restaurant services limits credit on inter-unit food supplies taxed at reduced rate. Respondents conclude that input tax credit cannot be claimed by a restaurant outlet on cooked or semi cooked food received from a related central kitchen when that food is used to supply customers at the reduced rate; a representation to government to permit such credit is suggested, and there is a further query whether the supply from the central kitchen properly qualifies as a restaurant service taxed at the reduced rate.