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RTP GST Series May 2024 (Part-5: Eligibility of ITC on Hotel Service)

We have started a RTP series on GST in MCQ form where we will post MCQs along with detailed Explanations along with additional questions surrounding the concepts asked in RTP for GST CA Final issued for May 2024.


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Eligibility of ITC on Hotel Service


Facts

CEO of Dhairya Limited (Registered in Kerala) stays in Hotel for Business Trip in Maharashtra and paid Room charges of Rs. 2,25,000.


Qns: Whether Dhairya Limited is eligible for ITC on such charges ?


Answer: No, (For Explanation please refer next section)


Additional Qns: If Hotel is situated in Kerala?


Answer: Yes, ITC is available.


Additional Qns: Whether ITC would be eligible for Restaurant expenses of Rs. 25,000 for official Meeting, if Hotel is situated in Kerala?


Answer: No


Additional Qns: Whether ITC would be eligible for Room Charges of Rs. 25,000 inclusive of complementary Breakfast for official Meeting, if Hotel is situated in Kerala?


Answer: Yes


Additional Qns: A Conference/Seminar was arranged in the Hotel in Kerala for which rent of conference Room was Rs. 2 Lakhs & Food Charges were Rs. 50,000. On what amount ITC would be available ?


Answer: Rs. 2 Lakhs


Explanations

For Complete details of GST on Hotel & Restaurant Service, Please read at GST on Hotel & Restaurant Service


Above questions are related to two concepts which are discussed below:


Place of Supply in case of Hotel Accommodation


As per Section 12(3)(b), Place of Supply

(b) by way of lodging accommodation by a hotel, inn, guest house, home stay, club or campsite, by whatever name called, and including a house boat or any other vessel;


shall be the location at which the immovable property is located


Further as per Section 12(4), The place of supply of restaurant and catering services, personal grooming, fitness, beauty treatment, health service including cosmetic and plastic surgery shall be the location where the services are actually performed.


Accordingly, in case Hotel is situated in Maharashtra, Hotel needs to raise invoice of CGST & SGST as it is local supply considering place of Supply is Maharashtra. However, Dhairya Limited is registered in the Kerala, so it can not avail ITC of local supply happened in Maharashtra. It can only avail ITC of inter-state supply.


Further, in case, Hotel is situated in Kerala, ITC would be available for Room Charges.


ITC is blocked for Food & catering charges as per Section 17(5)


ITC related to food and beverages, outdoor catering is not available even if it used for furtherance of business like office meeting etc.


ITC related to these items can only be available if these are used for further supply of same category of service or as an element of taxable composite or mixed supply. It means like If hotel avail service of some outside restaurant for providing food in the conference.


In that case, ITC will be eligible to the Hotel but not to the person who has availed conference room cum food service from the Hotel.


Accordingly, ITC related to Food/Restaurant service is available to the Taxpayer even if it is situated in the Kerala.


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Disclaimer: We have taken due care to the best of our knowledge while explaining the provisions surrounding the issue purely for informational/academic purpose. It should not be considered as professional advice or consultancy to be relied upon. While due care has been taken by Fab Gyan in preparing this article, certain mistakes and omissions may creep in. The Fab Gyan or its Author does not accept any liability for any loss or damage of any kind arising out of any inaccurate or incomplete information in this document nor for any actions taken in reliance thereon.





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