In the realm of Goods and Services Tax (GST), understanding the intricacies of Input Tax Credit (ITC) is crucial for businesses to optimize their tax liabilities. While most inputs are eligible for ITC, food and beverage supplies often present a unique scenario. Let’s delve into the nuances of claiming Input Tax Credit on food and explore the exceptions and rates associated with it.
Input Tax Credit Exceptions on Food
Generally, input tax credit on food is considered a blocked credit for registered persons. However, there are exceptions to this rule:
- Inward Supply for Outward Taxable Supply: A registered person can claim ITC on food if it’s used for making an outward taxable supply of the same category of goods or services.
- Composite or Mixed Supply: If the inward supply of food is used in making a taxable composite or mixed supply, then the input tax credit is allowed.
Cases Where ITC on Food is Not Available
Despite the exceptions mentioned above, there are scenarios where input tax credit on food is not available:
- Personal Consumption: If goods or services of food are used for personal consumption, ITC is not available.
- Loss or Disposal: If food items are stolen, lost, destroyed, written off, or disposed of by way of gift or free samples, input tax credit cannot be claimed.
Can ITC be claimed on food used for business purposes?
Yes, a registered person can claim ITC on food if the inward supply is obtained from a registered supplier in the course or furtherance of business. However, it’s essential that the tax invoice is duly issued and the supply is made for any purpose in the course or furtherance of business.
GST Rates on Food and Beverage Services
Understanding the GST rates on food and beverage services is crucial for businesses to calculate their tax liabilities accurately. Here’s a breakdown of GST rates on various food items and services:
| Description | GST Rate | ITC Availability |
|---|---|---|
| Food services provided by restaurants including takeaway facility | 5% | No |
| Any food/drink served at cafeteria/canteen/mess operating on a contract basis | 5% | No |
| Services provided by restaurants within a hotel with a room tariff of less than Rs. 7,500 | 5% | No |
| Services provided by restaurants within a hotel with a room tariff of Rs. 7,500 or more | 18% | Yes |
| Meals/food services provided by Indian Railways/IRCTC or their licensees | 5% | No |
| Food services provided on a premise arranged for organizing function along with renting of such premises | 18% | Yes |
| Food services provided at exhibitions, events, conferences, and outdoor & indoor functions | 18% | Yes |
| Other Accommodation, food, and beverage services | 18% | Yes |
Conclusion
Navigating the complexities of Input Tax Credit on food requires a clear understanding of the exceptions and rates associated with it. While claiming ITC on food is generally restricted, certain scenarios allow businesses to optimize their tax liabilities effectively. By staying informed about the latest GST regulations and consulting with tax experts, businesses can ensure compliance and make informed financial decisions.
Remember, staying updated on regulatory changes is key to maintaining financial health and compliance in the dynamic landscape of taxation.
This Article is only a knowledge-sharing initiative and is based on the Relevant Provisions as applicable and as per the information existing at the time of the preparation. In no event RMPS & Co. or the Author or any other persons be liable for any direct and indirect result from this Article or any inadvertent omission of the provisions, update etc. if any
Published on: April 17, 2024