The Authority for Advance Ruling (AAR), Karnataka has ruled that the Cafe Coffee day, an Indian café chain owned by Coffee Day Global Limited, a subsidiary of Coffee Day Enterprises Limited, cannot opted to pay the GST @ 18% with input tax credit as the services being offered by them are classified under a heading attracting GST @ 5%, without input tax credit.
As per Notification No.46/2017 dated 14.11.2017, restaurants can pay GST @5% provided they do not avail input tax credit of the tax paid on input goods and services. Notification No.11/2017dated 28.06.2017.
According to the applicants, the above notification applies in circumstances where the applicant does not avail input tax credit. They contended that it does not prevent a restaurateur from paying tax at 18% (CGST – 9% and SGST – 9%) and availing input tax credit. Therefore, the said notification is applicable only in circumstances where the supplier does not claim input tax credit and it would not apply in the circumstances if the supplier wants to avail input tax credit.
The authority noted that under the Notification, availment of concessional rate of tax @5% is subject to the condition that the input tax credit is not availed. If the condition is not fulfilled, then the concessional rate will not apply. The phrase “provided that” signifies that a particular thing must happen before another thing can happen.
“The applicant’s contention suggests their view that the right to input tax credit is unfettered. However, the said Act, in Section 16(1), reads „Every registered person shall, subject to the conditions and restrictions as may be prescribed ….‟. These words indicate that the right to avail input tax credit is not an absolute right and conditions and restrictions may be prescribed for its availment. The contention of the applicant, thus, does not hold good,” it said.
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