ITC on dealer meet organized on behalf of Company

[Rajat Gupta]

A taxpayer engaged in cement trading organises a dealers meet in a hotel on behalf of the supplier company. The hotel issues an invoice as catering services to the taxpayer. The taxpayer will recover this amount from the Company. On these facts, I have the following 2 queries:

1. What document needs to be issued by the taxpayer to the Company to recover these expenses? A tax invoice as catering service or any other document mentioning reimbursement expenses.

2. If the taxpayer can issue tax invoice to the Company, can the taxpayer avail ITC on inward catering services received from the Hotel?

Note: Can we refer proviso to Section 17(5)(b)(i) to say that the inward supply of catering services has been used to make an outward supply of the same?

[Sadanand Bulbule]

The fulfillment of following proviso to Section 17[5][b][i] is crucial to determine the eligibilty to claim ITC:

Provided that the input tax credit in respect of such goods or services or both shall be available where an inward supply of such goods or services or both is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply;

Meaning: ITC would be allowed only if the catering is used as an element of an outward taxable supply of service to be billed as a composite service to the company. Substantiating contract/agreement is necessary to prove it.

[Shilpi Jain]

In this manner the taxpayer may be able to take credit. However, ultimately if its an outdoor catering service then the supplier company will not be eligible for credit. You could see if there is any other possibility to enable the entire credit.

AI Summary

Input tax credit: eligibility requires inward catering to be used as element of a taxable composite service billed to the company. ITC on catering for a dealers' meet is allowable only if the taxpayer's outward supply to the company is a taxable composite or mixed supply that includes catering; a substantiating contract/agreement is necessary to prove the catering was used to make an outward taxable supply of the same category. If the taxpayer is merely recovering expenses without making such a taxable supply, or if the service is outdoor catering, ITC eligibility may not arise and documentation should reflect whether a tax invoice for a composite service or a reimbursement invoice is appropriate.