UP AAAR: No GST Input Tax Credit on License Fee Payment to IRCTC or Indian Railway

The Uttar Pradesh Appellate Authority of Advance Ruling (AAAR) held that no Input Tax Credit (ITC) could be claimed on 5% GST that is paid on a license fee to IRCTC or Indian Railway thus upholding the AAR’s ruling. M/s. Amar Food Products, the appellant, is in the General Minor Units (GMU) at Railway Platforms business and runs the concept of packaged food items, cooked items, and drinks.

The appellant was seeking the advance ruling related to the matter of whether food items supplied at General Minor Units that are situated at Railway Platforms (that includes the only counter sale of drinks, packed food items, and cooked items) shall be treated as “Sale of Services” or “Sale of Goods”.

The other matter that was raised is that if the aforesaid transaction is the sale of services then whether the entire sales revenue shall be subject to taxation at 5% rate without Input Tax Credit A complete guide for understanding the basics of input tax credit and it calculation with detailed examples under GST (Goods and Services Tax) India. Read more under serial no. 7(ia) of notification no. 11/2017-CT (Rate) dated 28.06.2017 or else the assessee could opt to pay taxation at 18% with ITC under serial no. 7(ix) of that notification.

The AAR held that the supply of Food items at GMUS that is the only counter sale of drinks, packed food items, and cooked items, shall be treated as ‘Supply of Services’. The AAR further held that entire sales revenue shall have 5% taxation without ITC as per serial No. 7(ia) of notification No. 11/2017- Central Tax Rate that is dated June 28, 2017. Thus the Appellant cannot put a claim on the Input Tax Credit of GST that is paid on license fees to IRCTC or Indian railways.

However, the appellant who disagreed with the unfavourable ruling of AAR (Authority for Advance Rulings) filed the appeal before the AAAR.

The Coram of Ajay Dixit and Amrita Soni held that the appellant has presented the case laws that are prior to the GST era. However, with the implementation of the concept of GST, the ambiguity in taxation has been lowered to a greater extent. The AAAR noted that after the introduction of Sl No. 7(a)as per Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 (as amended) the Law is crystal clear that the GST rate on supply of goods, (being food or any other article for the purpose of consumption of human beings or any drink by the Indian Railways or Indian Railways Catering and Tourism Corporation Ltd or their licensees, whether located in trains or at platforms) will be taxed at 5% without ITC.