Eating in or Eating Out food both are easy. What difficult is understanding the tax implication on it. This article contains the eligibility of Input Tax Credit (ITC) of GST paid on food and beverages.
As per Sec. 17(5) of CGST Act 2017, GST ITC on Food and Beverages supplies are blocked credit for registered person, except:
- where an inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both,
- Also, if such inward supply is used in making a taxable composite or mixed supply then the input tax is allowed.
The above points is summarized in the picture:
But, No ITC is available on :
- Goods or services or both used for personal consumption.
- Goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples.
Therefore, the fact comes out from above is that the credit chain ends when goods or services are sold to the final consumer for personal use.
The distinction between personal consumption and business consumption could very well be a subject of debate.
Top Frequently Asked Questions(FAQs)
- Is ITC under GST eligible in case of consumption of a banquet food?
Ans. ITC is available where inward supply is obtained from a registered supplier by a registered person in the course or furtherance of business where a tax invoice duly issued and supply has actually been made. Therefore, no ITC is not available if the supply is obtained for any purpose other than in the course or furtherance of business.
- Can ITC be claimed against expenses on staff welfare done with the business purpose under GST. There are expenses like buying coffee powder or tea on which 28% GST was levied. Can I take ITC on this?
Ans. ITC on food items is not available, coffee falls in this category.
- Can an employer claim Input Tax credit for taking their employees on team lunch to restaurants under GST?
Ans. No, Section 17(5) of CGST disallows ITC on Food and beverages. A restaurant bill will fall under this.
- Can I claim input tax credit on local hotel bill in the course or furtherance of business, if bill issued on firm name having GST number?
Ans. Yes, but the bill should also contain your company’s GST number then only you can claim Input tax credit if the expense is for stay. Food expenses however cannot be claimed for ITC. However, you can claim the food expenses as expenses in your P&L Statement.
- We are an event management company. Our work is organizing corporate meetings and events in hotels. Can we claim ITC on bills of different states?
Ans. Yes, you can claim ITC on hotel bill (not food expenses only stay bill) provided you are having your GST registration in the same state. However, the Place of Supply in case of Hotel business is the location of the Hotel. Therefore, Hotel will never charge IGST (As per section 12(3)IGST)
- We purchase Dry fruits from the wholesale market and sale in Gift rap in the baskets. Are we eligible for ITC of GST on dry fruits?
Ans. As per section 17(5)(g) of CGST Act, goods or services used as an element of composite or mixed supply are eligible for GST ITC.
- ITC on Food Expenses incurred in connection with business promotional activities
Ans. As per Sec 17(5) of CGST Act – ITC will not be available on -Goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples. Therefore, ITC is not available If any business concern incurs expenses for business promotion in form of gift of dry fruits, which are to be distributed to their clients.
- Can a restaurant avail ITC ?
Ans. Yes, restaurant registered as normal tax payer are eligible for GST ITC. As an inward supply of goods or services are used for making an outward taxable supply.
- Can Restaurant holding Franchise, and leving GST on Food Sales @5% claim ITC ?
Ans. Rate of 5% is subject to ITC restriction. Therefore, you cannot claim ITC.
- We are a manufacturing company and having canteen facility also in company premises. Outside person is cooking here and raise invoice with GST to our members. In this scenario, ITC is eligible or not?
Ans. The employees will be liable to pay GST. The reason is that it amounts to outward supply leading to final consumption. Therefore, No ITC is available.
- Can a registered person under GST claim input tax credit on drinking water purchased for office premises?
Ans. No, ITC will not be available as per Section 17(5) (g), “goods or services or both used for personal consumption” will not be entitled for ITC. Water comes under personal consumption. Therefore, No ITC will be available.
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