ITC eligibility on Food, Goods and Services Tax - GST

[THYAGARAJAN KALYANASUNDARAM]

Dear Experts,

One of my clients running a Training institute in Chennai and providing food to the student who join the course during the course period. We are collecting the course fees from the student along with food, now my query is that, do we eligible to claim the input tax credit on the food bill.

Thanks in Advance.

Posts / Replies

[Rajagopalan Ranganathan]

Sir

According to Section 17 (5) (b) (i) of CGST Act, 2017 input tax credit shall not be available in respect of food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) except when used for the purposes specified therein, life insurance and health insurance :

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;

Provided that the input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force

[KASTURI SETHI]

In the scenario explained by the querist, his client is clearly hit by exclusion clause as mentioned above by Sh.Ranganathan, Sir. Not eligible.

[Alkesh Jani]

Sir,

In this regards, the definition of Mixed supply is give below for ready reference

“(74) “mixed supply” means two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply.

Illustration - A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drinks and fruit juices when supplied for a single price is a mixed supply. Each of these items can be supplied separately and is not dependent on any other. It shall not be a mixed supply if these items are supplied separately”

Further, proviso to Section 17(5)(b) (i) is also reproduced below

“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”

In the instant case, the client is supply “Mixed supply” of training and foods and charges of food is also includes in the course fees, i.e. for a single price.

Based on above, I am of the view that ITC is admissible.

Thanks,

With Due regards

[VISHWNANATH NR]

Dear sir,

Kindly light your views on the views expressed by the Aklesh Jain

[KASTURI SETHI]

What type of training is being provided ? Is it coaching centre or vocational centre ? If we treat both as mixed supply, the highest rate of the two (mixed supply) will be applicable. If applicable rate on food is at lower rate i.e. 5% , then ITC is not admissible. There is also a question mark on the mixed supply. Whether we can treat both supplies as mixed supply or composite supply ? Or both are individuals. . All facts have to be verified before arriving at correct decision.

[Alkesh Jani]

Sir,

I agree with the question raised by Sh. Kasturiji Sir, as query raised may be different from the factual transaction and facts mentioned. It can only be ascertain on scrutiny of the documents and relevant transactions.

However, as per the query raised and words used in it, clearly states that food is included in the fees, the commercial training and coaching is classified under HSN Code 99929 and food and beverages is classified under 99633, both are distinct services and are made in conjunction with each other and are supplied for a single price, and both the services are not dependent on any other. therefore, we can conclude that it falls within the ambit of “Mixed supply”, as both the services i.e. training and food are not dependent on each other, moreover, it cannot be termed as “composite supply” as both the services are not naturally bundled.

Further, the proviso clearly states that for making outward supply as an element of Mixed supply, therefore, supply of food and beverages is an element of taxable supply.

Thanks,

With due regards

[Ganeshan Kalyani]

The credit on food is not eligible. In my view, the discussion is taking place on tax applicable on outward supply. The input tax eligibility is the other side of the same coin. The input service need to read with section 17(5) to determine its eligibility. It cannot be correlated with the outward tax payable to take credit.

[KASTURI SETHI]

Dear Sh.Kalyani Ji,

What I understand you want to say one should not resort to "Mixed Supply" in order to take credit. In mixed supply, GST is attracted at highest rate of tax involving two or more services or goods. One should not go backward rather than going forward.

[Ganeshan Kalyani]

Sir, I mean to say that outward supply can be mixed or composite or individual supply of service. These terms will help to arrive at tax rate applicable on the outward supply. These will not help to arrive at the eligibility of inward supply which is food in this case. For eligibility of input tax credit on inward supply section 17(5) has to be seen. This I accept. But how the determination of type of outward supply will help to find out the eligibility of input tax credit that I need to understand.

[Alkesh Jani]

Dear Experts,

Please re-comment after perusing Proviso given at Section 17 (5) (b)(i) of CGST Act,2017. I also Invite you to share your interpretation on the above referred proviso.

Thanks,

With due regards.

[Himansu Sekhar]

It is not a mixed supply. Itc on food is not pernissible

[KASTURI SETHI]

Yes. It is not a package. Both services can be supplied separately without any legal hurdle. Nobody would like to be a 'victim' of 'Mixed Supply' which attract higher rate of GST in the form of mixed supply. Otherwise, it would also be costly for the assessee for the purpose of ITC. Govt.'s kitty would be enriched.

[Alkesh Jani]

Sir,

In this matter, the views expressed by Shri Ganeshan Kalyaniji is not acceptable as the same is without taking into account the proviso. The views expressed by Shri Himashuji is also not acceptable as, it does not negate as why it is not a mixed supply.

The views forwarded by Shri Kasturiji Sir, and arriving at the conclusion that it not a 'package' so it cannot be termed as “mixed supply” is also not acceptable by me, as the package word is used in illustration and is with regards to supply of different (items) goods and not for services.

Concluding from my side, I wish to add that there are two services supplied by the querist, training and food. The cost of course includes food and no separate cost is recovered, it is not naturally bundled. Therefore, the said supply is not composite supply and even if it is composite supply, as per the proviso, ITC on food and beverages is admissible in case of supply of mixed or composite supply.

Thanks,

With regards

[Himansu Sekhar]

Interpretational difference

[KASTURI SETHI]

The word, 'package' though in an illustration, is not superfluous.

Let us agree to disagree !!! and use our time and energy towards next query. Life becomes listless without problem (complexities). We can not learn and enjoy if question is so simple. Only complicated questions should find place in this forum.

[Ganeshan Kalyani]

The existence of Tribunal, High Court, Supreme Court indicates that there is difference in opinion. There are several cases in the litigation where one authority has different views and the others has his own views. Thus, it is normal to expect different views. As an expert we should offer our readers different fruits in the basket so that he chooses one amongst all and enjoy it. Fruits should not express disagreements among themselves as each fruit has it's own vitamins. Fruit should leave that choice to the person wanting to have it. Thanks.

Happy Independence Day to all.

[Muthukumar Muthunarasimhan]

Dear Experts,

As per my view after exploring all the nature of mixed supply they are rendering two different activities such as Supply of service and supply of goods . Training amounts to supply of service and provide a food is Supply of goods. Both are in different supplies and cannot be construed as Mixed Supply , because only one element of supply of goods he is providing which is an exclusive in nature as well as out of definition of mixed supplies. Hence.they cannot avail ITC on food bills.

[KASTURI SETHI]

Sh. Muthukumar Muthunarasimhan Ji,

What is mixed supply ? Pl. read the following extract of Board's Flyer No.4 dated 1.1.18. Regarding the definition I differ from you.

Mixed Supply

Under GST, a mixed supply means two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply;

Illustration : A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drinks and fruit juices when supplied for a single, price is a mixed supply. Each of these items can be supplied separately and is not dependent on any other. It shall not be a mixed supply if these items are supplied separately.

In order to identify if the particular supply is a Mixed Supply, the first requisite is to rule out that the supply is a composite supply. A supply can be a mixed supply only if it is not a composite supply. As a corollary it can be said that if the transaction consists of supplies not naturally bundled in the ordinary course of business then it would be a Mixed Supply. Once the amenability of the transaction as a composite supply is ruled out, it would be a mixed supply, classified in terms of a supply of goods or services attracting highest rate of tax.

The following illustration given in the Education Guide of CBEC referred to above can be a pointer towards a mixed supply of services :-

“A house is given on rent one floor of which is to be used as residence and the other for housing a printing press. Such renting for two different purposes is not naturally bundled in the ordinary course of business. Therefore, if a single rent deed is executed it will be treated as a service comprising entirely of such service which attracts highest liability of service tax. In this case renting for use as residence is a negative list service while renting for non-residence use is chargeable to tax. Since the latter category attracts highest liability of service tax amongst the two services bundled together, the entire bundle would be treated as renting of commercial property.”

[Muthukumar Muthunarasimhan]

Dear Mr.Kasturi Sethi ji,

I agree your reply regarding Mixed Supply and applying the provisions they have to pay highest tax which is Imparting trainning rather than catering. Hence as per your view ITC is eligible for catering bills?

[KASTURI SETHI]

Dear Sir, I am just discussing the definition of Mixed Supply. Regarding the eligibility, I have already posted my replies. I stick to my point. It is not a package. Both training and supply of food should be dealt with separately. It is in the interest of tax payer.

[Muthukumar Muthunarasimhan]

Dear Kasturi Sethi ji,

Thanks for your comments and views.

[Ramakrishnan Krishnamurthy]

First we will examine whether it will be mixed supply or composite supply

Section 2 (74) “mixed supply” means two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply.

Illustration.- A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drinks and fruit juices when supplied for a single price is a mixed supply. Each of these items can be supplied separately and is not dependent on any other. It shall not be a mixed supply if these items are supplied separately;

From the above it is clear that if a supply involves two or more individual supplies of goods or services which are unnaturally bundled, in other words the package is customized for a customer or customers and sold for single price and finally the supplier must be able supply the products separately also and in other words he must be in a business of supplying them separately also. In the given case he may not be interested in supplying food alone to a set of students who are not enrolling for the course. Hence, this shall not come under the mixed supply.

If we look in to Section 2 (30) “composite supply” means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply;

Illustration.- Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply;

In my view this is more appropriate the course is the principal supply and the amount collected for the food is naturally bundled to make the principal supply enjoyable. The entire amount collected will be composite supply and subject to rate of tax applicable for the principal supply and the supply of food is a element of a taxable composite supply.

conclusions:- The supply is very much coming under the composite supply as the intention of the supplier, which very important to decide the taxability, is to supply both together to make the principal supply enjoyable and meaningful.

Now we will see the relevant provisions of blocked credit to see the eligibility to claim the ITC. As per the Section 17 (5) (b) THE CENTRAL GOODS AND SERVICES TAX (AMENDMENT) ACT, 2018 the reproduced below

(b) the following supply of goods or services or both-

(i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) except when used for the purposes specified therein, life insurance and health insurance:

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;

Like in the airline services, the food supplied becomes an element of taxable a composite supply of service with the transport of passengers. Here also food becomes an element of a taxable composite supply.

Hence, the input tax credit is eligible

[KASTURI SETHI]

Dear Querist,

This decision of AAAR, West Bengal is worth perusal :-

2019 (27) G.S.T.L. 131 (App. A.A.R. - GST) = 2019 (7) TMI 314 - APPELLATE AUTHORITY FOR ADVANCE RULING, WEST BENGAL IN RE : SARJ EDUCATIONAL CENTRE