Question ID :
44846
RCM ITC In case of Restaurant Opted to Pay 5% on Restaurant Supply
A registered person runs a restaurant and a guesthouse on the same premises. The restaurant pays GST at 5% without ITC. Rent of ?60,000 is paid for both under a single bill, with GST under RCM at 18% (?10,800). In this case, which option is more suitable for claiming ITC for the guesthouse portion?
Option 1: Based on the ratio of outward supply.
Option 2: Specify separate rent for the guesthouse and restaurant in the rent agreement, obtain two invoices, and claim ITC of GST paid under RCM for the guesthouse rent.
Suggestions are welcome!
Posted by
SHABBIRALI ABBSBHAI CHAUDHARI
on
May 05, 2025
Filed Under
GST
Option 2 is more suitable: Specify separate rent for the guesthouse and restaurant in the agreement, obtain two invoices, and claim ITC for the guesthouse portion.
> The 18% GST under RCM on rent is eligible for ITC only if the rented premises are used for business purposes. Since the guesthouse (likely a business asset) qualifies, segregating rents ensures clear ITC claims for the guesthouse.
> A single bill complicates ITC allocation, as the 5% GST restaurant portion is ineligible for ITC. Splitting invoices avoids disputes and aligns with GST’s input tax credit proportionality principles.
This approach ensures compliance and maximizes ITC benefits.
Posted by
CA NIKHIL JAIN on
May 06, 2025