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Unraveling the complexities of GST ITC reversals in hospitality industry for alcoholic liquor sale

Updated: Mar 27, 2023

"ITC reversals required w.r.t. sale of alcoholic liquor for human consumption covered under exempt supplies."

- The West Bengal AAR ruling


Facts of the case
  • Karnani FNB Specialities LLP (‘the applicant’) is engaged in providing restaurant, catering and banquet hall services. Along with the aforesaid supplies or on a standalone basis, the applicant is also engaged in the selling/serving of alcoholic liquor for human consumption to its customers.

  • The applicant approached the AAR to understand whether the applicant is required to undertake the ITC reversal to the extent of a turnover that relates to the sale of alcoholic liquor for human consumption.

West Bengal AAR observations and ruling [22/WBAAR/2022-23 dated 09 February 2023]

  • The AAR stated that Article 366(12A) provides specific exclusion towards GST chargeability on the supply of alcoholic liquor for human consumption. However, it does not provide exclusion of the same from the scope of ‘supply’ itself.

  • The AAR concluded that the sale of alcoholic liquor for human consumption is a supply not leviable to tax under the CGST Act; therefore, the same would be covered under ‘non-taxable supply’ and would be treated as ‘exempt supply’.

  • Thus, the applicant is required to reverse the ITC attributable to such exempt supply.

This ruling shall impact the businesses that have offset the ITC in respect of supply of alcoholic liquor for human consumption.


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