Restaurant services

[VishnuPriya R]

In case of restaurant services, if they opt for 5% rate of GST for outward supplies by virtue ofNotification No. 20/2019-Central Tax (Rate). They are not eligible for availment of ITC as per the notification. But however, if inadvertenly they have availed an ITC say for 2 months and subsequently found out the same and reversed the ITC along with interest. Can they still continue in 5% rate of tax or because they have availed inadvertenly ITC for 2 months and subseqently reversed the same, the benefit of 5% does not applicable to them and subsequently apply 18% on outward supply.

 

[KASTURI SETHI]

Dear Querist,

ITC taken and subsequently reversed  along  with interest tantamounts to "credit not taken". You can continue with 5% option.  You have reversed on your own. It proves your bona fides..

[Sadanand Bulbule]

I endorse the legal position expressed by Sh. Sethi Sir

[VishnuPriya R]

Thank you sir for the clarification

[Shilpi Jain]

Standalone Restaurants liable @5% only. Just because you may have taken credit for some period does not mean that you can pay GST @18%. There is a specific explanation in this regard in the rate notification itself.

AI Summary

Input tax credit reversal preserves reduced GST rate option for restaurant services when credits are repaid with interest.
Standalone restaurants opting for the reduced GST rate are precluded from claiming Input Tax Credit; if ITC is inadvertently claimed but subsequently reversed with interest, that reversal constitutes "credit not taken" and permits continuation of the reduced rate option, reflecting corrective action and bona fides.