itc on restaurant business

[VINAY AGRAWAL]

dear sir/madam

my client is engaged in the business of Hotel and restaurant business under same GSTN, for the restaurant business client has opted regular basis, client has charges 5% GST on the restaurant business and not taken any ITC as the same is not allowed, however client has utilized credit balance of ITC of hotel business with output liability on restaurant business, officials suggested that you should have pay tax on restaurant business on cash payment basis and availment of credit balance of ITC is not as per law, please suggest and also provide supporting.

Thanks

AI Summary

Tax Credits Split: Hotel and Restaurant Services Blocked from Cross-Credit Under GST Rule 5% Service Taxation A business with hotel and restaurant services under the same GST registration sought guidance on tax credit usage. The discussion revealed that restaurant services taxed at 5% without input tax credit (ITC) cannot utilize ITC from hotel business. The law mandates separate tax treatment, requiring cash payment for restaurant services and prohibiting cross-utilization of tax credits. Voluntary rectification through DRC-03 and proper accounting segregation was recommended to ensure compliance.