RESTAURANT SERVICES, Goods and Services Tax - GST

[SSOE SSOE]

Dear Sir/Madam

We are facilitating hotel accommodation services to our clients.First hotel raise invoice on our entity.Later we raise invoice on our client after adding some service charges.

In the hotel bill they charge for both food and accommodation.For accommodation hotel charges @ 12% and for food and beverages it charges @ 5%.

We are invoicing to our client with two line items , one for accommodation(including service charge) @ 12% and other for food charges @ 5% (including service charge).

Our query:

Whether we can claim input on food charges as it is covered under further supply as per proviso to section 17(5) clause (b).As per our understanding we are in trading of services.

Gst rate notification says input tax credit on goods and services is not allowed if gst is charged @ 5%.

Can a notification override Act ? Because act allows input in case of further supply.

We believe that for all the trading transactions input should be allowed.

Posts / Replies

[Mahir S]

As per Notification No. 46/2017 - Central Tax (Rate), standalone restaurants will charge only 5 % GST, but cannot enjoy any ITC on the inputs.

It may also be noted that benefits were already provided n the past, by way of slashing the GST rates on restaurant bills from 18 % to 5 % and the reason for same was that the restaurant sector were not forwarding the benefits of the input tax credit received, to its customers.

[Prasanna Kumar]

Dear queriest

By reading your query, I understand you are offering both restaurant/catering service and accommodation services. This amounts combined supply. In the notification Notification No. 11/2017-Central Tax (Rate) New Delhi, the 28th June, 2017, your service falls under serial number 7, Heading 9963 (Accommodation, food and beverage services). In this again your service correctly fits in to sub clause "( e) This entry covers composite supply of ‘outdoor catering’ together with renting of premises (including hotel, convention center, club, pandal, shamiana or any other place, specially arranged for organising a function) provided by suppliers providing ‘hotel accommodation’ at ‘specified premises’, or suppliers located in ‘specified premises’". This catetgory attracts a levy of 9% SGST and 9% CGST.

Please give more information about the rent of premises per unit and where the premises are located, is it a hotel belonging to somebody or a residential unit given on rent. This will give more clarity on your issue.

Regards,

Prasanna Kumar

[KASTURI SETHI]

I fully endorse the views of Sh. Mahir S, Sir. Reply is fully legal force as well as logical force. Regarding the overriding effect of notification over the Act, it is worthwhile to mention that notification is issued under the Act. So question of overriding does not arise. Reply of Sh.Mahir S, sir is self-explanatory and also includes this aspect also. I have just clarified.

[DR.MARIAPPAN GOVINDARAJAN]

You cannot claim input credit.

[SSOE SSOE]

Dear Sir,

FYI- we are not caterers.

Hotels provide services directly to our clients such as accommodation with food. Hotels raise bill on us for the above services.

Later on we will raise bill on our clients with service charges (Hotel charges +Service Charges (i.e our margin) + GST)

i.e billing is routed through our entity

Our Query:

1. ITC allowed or not: Sec-17(5) allows ITC on food and beverages in case of further supply or as a part of composite supply.Where as rate notification restricts ITC in case rate is charges @ 5% for restaurant services.

2. Which rate of Tax to be charged on our clients for accommodation and food charges.

3.Accomodation charges more than 1000 but less than 7500 per unit per day or equivalent.

[Alkesh Jani]

Shri

What is your nature of supply and for what you are facilitating for accommodations and food.

[SSOE SSOE]

sir

We receive service order from our client saying that their employees and guests need hotel room for certain period.Then we talk to hotel people and arrange rooms on those days.Like this it happens through out the month.For all the check out employees during that month hotel raises invoice on our entity and we raise invoice on our client with service charges.

[Prasanna Kumar]

Der Querist

Based on your latest explanation , I am of the view that you need to continue what you are charging for accommodation hotel charges @ 12% and for food and beverages it charges @ 5% ON YOUR VALUE charged to customers. As per the rules, you are not eligible to any ITC.

Please note that twice the GST is paid to the government on accommodation charges and food and beverages supplied to customers. .This ia an anomaly which has to be rectified by an amendment to existing laws.

[Alkesh Jani]

Shri

In respect of your query and details furnished are general in nature (service order), therefore, reply is given accordingly. However, in this case, you need to amend your registration with suitable service to be added.

The activity as per your query there is value addition and hence liable for GST. If we refer 2nd Proviso to Section 17(5) of CGST Act,2017 which reads as under

“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; (strike out is not applicable in your case.)

Based on above, I am of the view that you are eligible for ITC.