Single Invoice Sufficient for Event Packages to Claim GST ITC? An Analysis of AAR Ruling

Businesses that offer bundled services face challenges due to the complex structure of the Goods and Services Tax (GST) Act, 2017. The validity of Input Tax Credit (ITC) on food, drink, and lodging purchased from hotels, as well as the invoicing requirements around these claims, have been a frequent source of debate for the event management sector.

A recent advance ruling by the West Bengal Authority for Advance Ruling has provided clarity on this front. The authority answers the questions regarding ITC eligibility of the event management when food and beverages provided and the necessity of separate invoices.

In the advance ruling, the applicant was engaged in organizing corporate events such as offsite meetings, conferences, training programs, and similar events. To execute these business packages, the applicant books hotels, rents conference rooms, and arranges meals for the participants.

Typically, the hotels provide the applicant with bundled services, which include room accommodation, conference space, and food (such as buffets, lunches, dinners, teas, and snacks).

The hotels generally issue a single invoice to the applicant showing these components, which may be itemized or completely bundled under a single head. Subsequently, the applicant charges their corporate client a consolidated event management fee encompassing all these elements.

The Core issue

The core issue is separate invoices required from hotel vendors to claim ITC on food and beverage services and necessary conditions to be met. Also, whether the event management could claim ITC with such a single invoice.

Section 16(2) and Section 17((5)(b)(i)) - Simple Understanding

Section 16(2) of the CGST Act states that a registered person can claim ITC only if they possess a valid tax invoice, have received the goods or services, and the supplier has paid the tax to the Government.

Section 17(5)(b)(i), which restricts ITC on food and beverages from claiming ITC. However, it is also 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.

Determining the Nature of Supply

The event management services mostly involve multiple services which could be determined either as a composite supply or a mixed supply.

Composite Supply (Section 2(30)): Defined as a supply consisting of two or more taxable supplies of goods or services, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, with one being the principal supply.

Mixed Supply (Section 2(74)): It is defined as two or more individual supplies made in conjunction for a single price, which do not constitute a composite supply, and where each item can be supplied separately.

The interesting part is that the GST Act does not explicitly define "event management service". However, as a trade practice, it involves a wide array of services including venue booking, elaborate planning, room accommodation, banquet hall arrangements, venue decoration, guest transportation, and the provision of food and beverages.

Thus, as per the advance ruling, these elements are provided as a package and are naturally bundled. Therefore, event management satisfies the definition of a "composite supply". In this bundle, the management of the event is the principal supply, while foods, beverages, hotel rooms, and venue bookings are ancillary services.

Eligibility of ITC on Food and Beverages

The authority applied the proviso to Section 17(5)(b)(i) after determining that event management is an outward composite supply.

The ruling states that “The proviso mandates that the registered person must either make 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 in order to get the benefit of the proviso. In our case the applicant makes an outward supply of event management which is taxable supply and foods and beverages are supplied as an element of outward composite supply of event management. So in our considered view, the applicant is eligible for availing Input Tax Credit on food and beverage services under the proviso to Section 17(5) for carrying out event management services which includes supply of foods and beverages.”

‘Single Invoice’ or ‘Separate Invoices?

When an event management procures the entire supply, including F&B, from the hotel, in this transaction, the hotel itself is providing a composite supply (e.g., banquet hall services along with catering).

The Authority stated that individual elements of such a supply lose their separate identities. Consequently, it is perfectly logical for the hotel to issue a single invoice. The authority said that nowhere in the GST Act is there a specific requirement mandating separate invoices for the individual elements of a composite supply for the recipient to claim ITC.

Therefore, a single invoice issued by the hotel is sufficient for the event management to avail ITC, provided all other conditions of Section 16 are met and the hotel has charged the tax rate applicable to the principal supply.

In the case of invoicing the client with margin, that is where a hotel bills the event team for food separately, and the applicant then bills the client with an added margin, the event management still remains eligible for ITC. However, the invoice to the client must charge the rate applicable to the principal supply if used as an element of composite supply.

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