Order Date – 09 February 2023

Facts –

• The Applicant, M/s Karnani FNB Specialities LLP, is engaged in the business of providing restaurant services from its lounge bar called “The GRID” and is also providing catering services as well as banquet renting services. Along with such supplies or on a standalone basis, at times, the applicant is also engaged in selling/serving of alcoholic liquor for human consumption to its customers.

Issue –

• Whether the applicant is required to reverse ITC on sale of alcoholic liquor for human consumption to its customers?

Order –

• The AAR observed that that sale of alcoholic liquor for human consumption is a supply under the GST Act on which tax is not leviable. Further, the activities of selling of alcoholic liquor for human consumption by the applicant would be treated as “non-taxable supply‟ and therefore falls under the category of “exempt supply‟ under the GST Act, the applicant is required to reverse input tax credit attributable to the exempt supply under sub-section (2) of section 17 of the GST Act read with rule 42 of the GST Rules.
• Relying on the maxim Quando aliquid prohibetur fieri, prohibetur ex directo et per obliquum, it was held that since tax is not leviable on supply of alcoholic liquor for human consumption under the GST Act, there cannot be any inward supply to the applicant of the said item on which tax is to be charged by its supplier or the applicant is liable to pay tax under reverse charge mechanism.
• Thus reversal of tax charged on inward supplies which are altogether different from outward exempted supplies of alcoholic liquor for human consumption would no way lead to discharging of GST liability on outward supply.