In Restaurants cum Bars, liquor and food items both are served. Liquor is non-GST supply whereas GST is levied on food. Whether common input tax credit needs to be reversed on proportionate sale of liquor? Does Rule 42 apply to Non GST supply also?
Case Details : GST- Reversal of ITC on liquor
Case Related To : Karnani fnb specialities llp
Declared By : West Bengal – High Court on 09-02-2023
What Happened Exactly :
- The applicant is engaged in the business of providing restaurant services from its lounge bar called “The GRID”. They also providing catering services as well as banquet renting services.
- At times, the applicant is also engaged in selling/serving of alcoholic liquor for human consumption to its customers.
- The applicant sought advance ruling as to whether it is required to undertake reversal of ITC. In terms of Rule 42 to the extent of turnover that relates to sale of alcoholic liquor for human consumption.
- The question here is whether Rule 42 obliges the assessee to reverse ITC on Non GST supply also .
Court's Decision :
- The definition of goods under section 2(50) of the GST Act excludes only money and securities. Which means only money and securities cannot be treated as goods under the GST Act. In absence of any such exclusion for alcoholic liquor for human consumption, it qualifies as goods under the GST Act.
- The expression ‘supply’ includes sale of goods. Sale of goods, namely alcoholic liquor for human consumption for a consideration by the applicant in the course or furtherance of business. Thus, comes under the purview of supply defined in section 7 of the GST Act.
- The activities of selling of alcoholic liquor for human consumption by the applicant qualifies as supply under the GST Act. The Tax is not leviable and shall be treated as non-taxable supply.
- The term ‘exempt supply’ defined in clause (47) of section 2 of the CGST Act includes non-taxable supply. A conjoint reading of section 2(47) and 2(78) thus denotes clearly that the activities of selling of alcoholic liquor for human consumption would also be treated as ‘exempt supply’ under the GST Act. The applicant is required to reverse input tax credit attributable to the exempt supply under sub-section (2) of section 17 of the CGST Act read with Rule 42 of the CGST Rules.
- The applicant is 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.