Selling Of Alcoholic Liquor For Human Consumption Is A “Non-Taxable Supply”: AAR

The West Bengal Authority for Advance Ruling (AAR) has observed that the activities of selling alcoholic liquor for human consumption by the applicant would be treated as a "non-taxable supply" and therefore fall under the category of "exempt supply" under the GST Act.

The two-member bench of Brajesh Kumar Singh and Joyjit Banik has ruled that the applicant is required to reverse input tax credit (ITC) in terms of section 17(2) of the GST Act read with Rule 42 of the GST Rules for the sale of alcoholic liquor for human consumption.

The applicant is in the business of providing restaurant services from its lounge bar called "The GRID" and also provides catering services as well as banquet rental services. Along with such supplies or on a standalone basis, at times, the applicant is also engaged in selling or serving alcoholic liquor for human consumption to its customers.

The applicant has sought an advance ruling on the issue of whether the applicant is obliged to reverse ITC in view of the sale of alcoholic liquor for human consumption affected by it at its premises.

The applicant contended that the sale of alcohol being outside the ambit of GST, it is not liable to reverse ITC on such a supply by way of treating it as a non-taxable supply under Section 2(78) of the CGST Act.

The AAR noted that input tax, in relation to a registered person, means the tax that is charged on his inputs, input services, and capital goods, while output tax, in relation to a taxable person, means the tax chargeable under the GST Act on a taxable supply of goods or services or both made by the taxable person. As a result, reversing the tax charged on inward supplies, which are distinct from outward exempted supplies of alcoholic liquor for human consumption, would not result in the discharge of GST liability on outward supplies.

Applicant’s Name: Karnani FNB Specialities Ltd.

Date: 09.02.2023

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