GST - Place of Business - Guest House

[KSA Associates]

Assessee ABC ltd has GST registration in 2 states i.e. Maharashtra & Karnataka respectively. Earlier, the employees as well as foreign personnel of parent entity of the ABC Ltd used to stay in the Hotels of the Karnataka state for the business purpose. But since the Hotel Expenses started increasing, the management of ABC Ltd decided to take the Guest House on yearly rent Basis in Karnataka. The Question is whether ABC LTD can take GST Credit of same like of Hotel? Also whether is mandatory to add this guest house as additional place of Business.

The Guesthouse is used for meetings, stay purpose etc. for furtherance of Business.

[Raam Srinivasan Swaminathan Kalpathi]

In my considered view ABC Ltd is eligible to avail ITC on the Guest House tax invoice.  FYI, in one of our client's case we have even obtained refund of such ITC (the client was in the business of export of services).

Also, please note that if the Landlord of the guest house does not impute GST on his supply invoice (assume for a moment that the landlord's aggregate supply is below the GST turnover threshold), then the same will have to be remitted by ABC Ltd under RCM.

[Sadanand Bulbule]

In one case in Bengaluru, the GST authorities have disallowed crores of ITC on guest house rent under Section 17 [5] [c] & [d], even much before the Hon'ble Supreme Court judgement in Safari Retreat case. This needs careful approach or else you can go for Advance Ruling to be on the safer side.

[KASTURI SETHI]

Pl. go through Para Nos. 9.1, 9.2 & 9.3 of the following decision of AAAR, ODISHA

2019 (2) TMI 1527 - APPELLATE AUTHORITY FOR ADVANCE RULING, ODISHA - IN RE : NATIONAL ALUMINIUM COMPANY LIMITED

 

[Ganeshan Kalyani]

In my view, such accommodation is for stay of company employee. It is not for leisure or vacation but purely for business visit stay. So the credit should be allowed. By the word guest house one may understand it to be non-business purpose so credit may be denied considering it as personal consumption. So taxpayer need to explain it properly to the proper officer.

[KASTURI SETHI]

Dear Sir,

Pl. see para no.8.6 of the above decision posted by me.

Actually if there is any possibility of misuse of ITC/Cenvat Credit, Govt. disallows such credit. That is why Section 17 (5) exists. Otherwise services blocked under Section 17(5) are also in the course of business or furtherance of business but strings attached to Section 16 will have to be followed.

Thus the question of the phrase, "to be used in the course of business or furtherance of business" has been relegated to the background.

Sh.Sadanand Bulbule, Sir has correctly interpreted and opined.

Sh.Ganeshan Kalyani Ji,

Sir, I invite your further response for enrichment of my knowledge, if I am in the wrong in any aspect.

[Shilpi Jain]

You should be eligible for the credit as it is used for business and not blocked.

[Sadanand Bulbule]

This issue has disturbed the sleep of the concerned taxpayers. The top administration is very firm on this subject to disallow ITC. There is every possibility of re-opening the previous adjudication in pursuance of retrospective amendment to Section 17[5][d], when comes into play. Again the ball rolls back into the court for final settlement. Till then the "foot ball game" continues since there is no goal post.

[KSA Associates]

Thank you all for your valuable inputs.

[KSA Associates]

Dear Experts,

Can you please comment on whether it is mandatory to add this guest house as additional place of Business on GST portal?.

AI Summary

Input tax credit on rented guest house may be available but faces Section 17(5) blocking and reverse charge risks.
Eligibility for input tax credit on a guest house used for employee and business visitor accommodation depends on business use and exclusion from statutory blocked credits; authorities have in some instances disallowed ITC under Section 17(5). If the landlord does not levy GST, reverse charge may apply. Practitioners recommend Advance Ruling, robust documentation of business use, and cautious compliance due to possible disputes or retrospective amendments. The question whether the guest house must be added as an additional place of business on the GST portal remained unresolved in the discussion.