Sale of Alcoholic Liquor for Human Consumption Liable to Reverse ITC: AAR [Read Order]

The West Bengal Authority for Advance Ruling ( AAR ) has held that the sale of alcoholic liquor for human consumption would be liable to reverse Input Tax Credit ( ITC ).

The applicant Karnani Fnb Specialities Llp is engaged in the business of providing restaurant services from its lounge bar called “The GRID” and was also providing catering services as well as banquet renting services. Along with such supplies or on a standalone basis, at times, the applicant was also engaged in selling/serving alcoholic liquor for human consumption to its customers.

The applicant has sought an advance ruling as to whether the applicant was obliged to reverse input tax credit (ITC) under section 17(2) of the CGST Act read with rule 42 of the Central Goods and Services Tax Rules, 2017 (CGST Rules) in view of the sale of alcoholic liquor for human consumption affected by it at its premises under the facts & circumstances of the present case

Sujit Ghosh, on behalf of the applicant, submitted that adopting a meaning where alcoholic liquor was within the scope of „non-taxable supply‟, would also render the charging provision of the CGST Act which defines the term „supply‟ also unconstitutional by virtue of being ultra vires Article 366- 12(A) of the Constitution of India.

He further submitted that the Applicant was of the firm view that as the sale of alcohol was outside the ambit of GST, it was not liable to reverse ITC on such a supply by way of treating it as a non-taxable supply under Section 2(78) of the CGST Act (and therefore, exempt under Section 2(47)).

The Revenue submitted that Section 17(2) of the WBGST Act, 2017 has stated that where the goods or services or both were used by the registered person partly for effecting taxable supplies including zero-rated supply under this Act or under IGST Act and partly for effecting exempt supplies under this Act, the amount of credit would be restricted to so much of the input tax as was attributable to the said taxable supplies including zero-rated supplies.

Further, it was submitted that ITC should be reversed since the applicant affects the sale of alcoholic liquor for human consumption in addition to the supply of restaurant and outdoor catering services

The Authority of Advance Ruling of Brajesh Kumar Singh (Joint Commissioner CGST) and Joyjit Banik (Senior Joint Commissioner SGST) ruled that the applicant would be required to reverse input tax credit (ITC) in terms of sub-section (2) of section 17 of the GST Act read with Rule 42 of the GST Rules for sale of alcoholic liquor for human consumption.

To Read the full text of the Order CLICK HERE

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