TaxTMI 
TaxTMI 
Cross Utilisation of Eligible ITC for Payment of Output Tax Liability across business verticals under the same GST registration
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....ross Utilisation of Eligible ITC for Payment of Output Tax Liability across business verticals under the same GST registration<br> Query (Issue) Started By: - GAURAV SHARMA Dated:- 28-5-2026 Last Reply Date:- 10-6-2026 Goods and Services Tax - GST<br>Got 5 Replies<br>GST<br>As per our understanding, under the GST law, a taxpayer engaged in both restaurant services and trading activities under a single GSTIN can utilise eligible ITC accumulated (lying in excess in credit ledger after payment of output liability pertaining to trading business) from the trading business for payment of output GST liability pertaining to restaurant services, after reversing the ineligible ITC specifically attributable to restaurant services and common credits. ....
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.... Considering that Notification No. 11/2017-CT (Rate) only restricts availment of specific ITC relating to restaurant services and does not mandate payment of restaurant output liability exclusively through the electronic cash ledger, unlike the specific cash payment restriction prescribed for certain real estate services. Please shed light on this and provide any case law specific to this secanrio. For eg: A taxpayer is running a trading business and restaurant under the same GSTN and has incurred ITC of Rs. 1000 from the restaurant and Rs. 2000 from the trading business. He further has output liability of Rs. 1200 in restaurant business and Rs. 300 in trading business sale. So, once the taxpayer has reversed ITC of Rs. 1000 perta....
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....ining to restaurant services (blocked u/s 17(5)]. The remaining eligible ITC of Rs. 2000 accrued from the trading business can be freely utilised to pay off output liabilities of trading business i.e. Rs. 300. Thereafter, the excess ITC of Rs. 1200 lying in the ECL can be used to pay restaurant liabilities. Please provide matter specific case laws; if any. Reply By Sadanand Bulbule: The Reply: Under Notification No. 11/2017-CT(Rate), the restriction applicable to restaurant services taxable at 5% is only on availment of ITC attributable to such restaurant supplies and proportionate common credits, and there is no condition requiring that restaurant GST liability must be discharged exclusively through the electronic cash ledger. O....
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....nce the ineligible restaurant-related ITC is reversed under Section 17(2) read with Rules 42/43, the remaining eligible ITC lawfully accumulated from trading or other taxable businesses under the same GSTIN forms part of the common Electronic Credit Ledger and can be utilised towards any output tax liability in terms of Section 49 of the CGST Act. The GST law also does not prescribe any "one-to-one correlation" between the source of ITC and the outward supply against which such credit is utilised. Accordingly, eligible ITC arising from trading activity can be cross-utilised for payment of restaurant output tax liability, in the absence of any specific statutory embargo similar to the cash payment restrictions expressly prescribed in cert....
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....ain real estate notifications. There are no specific case laws. [This is my understanding and not an advise] Reply By Sadanand Bulbule: The Reply: The following satisfies your need: 2022 (1) TMI 1056 - APPELLATE AUTHORITY FOR ADVANCE RULING, GUJARAT - In Re: M/s. Aristo Bullion Pvt. Ltd. Reply By Raam Srinivasan Swaminathan Kalpathi: The Reply: Dear Querist While the law allows cross utilisation, as enunciated in the Aristo Bullion Pvt Ltd - 2022 (1) TMI 1056 - APPELLATE AUTHORITY FOR ADVANCE RULING, GUJARAT (AAAR ruling) and Larsen & Toubro Ltd (2022 10 TMI 1077 - CESTAT Kolkata) the procedural aspects are as yet unclear. The only mechanism available that this correspondent can think of is through the ISD route o....
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....r debit note or cross charge invoice. Kindly get the procedural aspects confirmed before embarking on cross utilisation. Reply By Shilpi Jain: The Reply: You are right that the itc pertaining to the trading business can be used to pay off restuarant related liability. This is my view as well Though there is a circular which states that this 5% itc on restaurant services has to be paid using cash ledger only. No such stipulation exists in the law. Reply By Kashish Gupta: The Reply: Your understanding is largely correct, Notification No. 11/2017-CT (Rate) restricts only the availment of ITC attributable to restaurant services taxed at 5%. It does not impose any obligation to discharge restaurant output tax liability exclusively t....
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....hrough the electronic cash ledger. This is a crucial distinction. The cash payment mandate exists expressly only for certain real estate services under the relevant notifications; no such parallel restriction has been introduced for restaurant services. In this regard, it is also pertinent to note that under the prior legislation, Notification No. 10/2002-CE dated 01.03.2002 under the Central Excise Act, 1944, and Notification No. 03/2019-Central Tax (Rate) dated 28.02.2019 under GST law, wherever the legislature intended that tax be paid exclusively through the electronic cash ledger, such a condition was expressly and specifically incorporated in the notification itself. Since Notification No. 11/2017-CT (Rate) contains no such specific m....
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....ention of cash payment through the electronic cash ledger, no such restriction can be read into it by implication or inference. This position is further fortified by the judgment of the Hon'ble Supreme Court in CCE vs. M/s Dai Ichi Karkaria Limited reported in 1999 (8) TMI 920 - SUPREME COURT (LB), wherein it was conclusively established that validly availed credit is indefeasible, and is available without any limitation in time, and there exists no requirement of co-relation between the source of credit and the specific output supply against which it is utilised. This position is supported in the matter of M/s. Larsen & Toubro Limited v. Commissioner of CGST & CX, Bhubaneswar Commissionerate reported as 2022 (10) TMI 1077. Hon....
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....9;ble CESTAT bench of Kolkata held that under Rule 3(1) of the CENVAT Credit Rules, 2004, all eligible credit flows into a common pool. There is no requirement of one-to-one correlation between input credit and output tax. Further, the Appellate Authority For Advance Ruling, Gujarat, in matter of In Re: M/s. Aristo Bullion Pvt. Ltd. reported as 2022 (1) TMI 1056, which overturned the lower ruling and held that Section 16(1) of the CGST Act does not require a specific nexus between inputs and the output supply against which ITC is utilised; GST operates as a business-wise system, not a commodity-wise one, and mandating item-wise ITC matching would create impractical compliance burdens for businesses operating under a single registration.<....
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