The Gujarat bench of the Authority for Advance Ruling ( AAR ), ruled that restaurant service supplies are exclusively not eligible for Input Tax Credit ( ITC ), while other supplies remain exempted.
The applicant, Mangaldas Mehta & Company Ltd runs a boutique hotel as well as a restaurant. The property was situated in the old city and has been declared as a heritage property. The applicant also holds a certificate in this regard.
The applicant has a demarcated area for the heritage hotel room, kitchen, courtyard & restaurant. As the declared tariff of the applicant falls below Rs. 7500/- the applicant charges 5% GST on the restaurant services. The applicant by virtue of the mandatory rate of 5% GST for restaurant service, is not entitled to claim ITC for the restaurant service & provisions of section 16 of the CGST Act, 2017, do not apply to the applicant in so far as the restaurant business is concerned
The bench found that the first question on which ruling is sought is whether they are entitled to claim ITC of the expenses incurred for the general expenses of the Company which are meant for the purpose of business.
The applicant has stated that they are providing restaurant services and discharging GST at 5% by availing the benefit of notification as amended. So, the applicant is not eligible to claim ITC incurred in respect of restaurant service.
The applicant has sought a ruling as to whether they are entitled to claim ITC of the expenses incurred or the general expenses of the Company. Further found that explanation (iv) reproduced supra would come to play meaning thereby that credit of input tax charged on goods or services used exclusively in supplying restaurant service is not eligible.
Furthermore credit of input tax charged on goods or services used partly for supplying such service and partly for effecting other supplies eligible for ITC, is reversed as if supply of such service is an exempt supply attracting provisions of section 17(2) of the CGST Act, 2017 and the rules made thereunder. The applicant has not mentioned what other supplies are being made by them. However, if they are engaged in providing certain other supplies eligible for ITC, information of which not privy to, in such a situation explanation (IV) (b) of the basic notification No. 11/2017-CT (Rate) would apply and credit would be eligible subject to the same. Therefore the two member bench of the tribunal comprising Riddesh Raval (member SGST) and Amit Kumar Mishra (member CGST) concluded that the ITC charge
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