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

Input tax credit restriction precludes using hotel ITC against restaurant GST, and cash payment plus voluntary rectification is required.
A taxpayer charging the concessional five-percent rate for restaurant supplies without claiming ITC cannot use ITC from its hotel operations to pay restaurant output tax. Credits must be segregated or proportionately reversed where supplies both with and without ITC eligibility are made. The taxpayer should stop cross-utilisation, recalculate wrongly used credits for past periods, and make voluntary payment via the prescribed electronic form while maintaining separate accounting for the two businesses.