Restaurant & Hotel Accounts Quries

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This discussion clarifies accounting queries for restaurant and hotel businesses. It addresses whether items like fry pans and mixies below £5,000 are assets or expenses (treated as expenses due to short lifespan). It also explains that GST on provision items like rice and wheat is generally claimable if the GST rate is 12% or 18%, but not on 5% GST. Finally, it confirms that costs for constructing a hotel building, including materials and labour, are capitalised as assets, and crucially, input tax credit (ITC) cannot be claimed on goods or services used for constructing immovable property as per Section 17(5)(d) of the GST Act.

Rajesh

Rajesh (Querist)

15 June 2020 Dear Sir,

1. I have purchased Fry pan & Mixie for business purpose. That value of the item is Below 5K. Now I treated as Asset or Expenses ???

2. Purchased provision items like rice, wheat & Maida etc for business purpose. we get tax invoice with GST, now I utilize that GST amount or not..

3. And we have own land, so we construct the building for hotel business. So we spend money for Building material purchase (Sand, Cement etc) & Labour charges. Now I treat the cost as asset or expenses.

Please advise.

Thanks in Advance.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

15 June 2020 1 Treat it as expenses. For hotel use life will be not more than one year.
2 Claim ITC.
3 It will be asset capitalise it.

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CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

15 June 2020 Correction of reply 2 No ITC can be claimed.

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Rajesh

Rajesh (Querist)

16 June 2020 Hi Sir, Thanks for Information. Point No. 2 - why not eligible for ITC Claim. Any provision is there ??. Please advise.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

16 June 2020 If you pay 5% GST no ITC can be claimed. ITC can be claimed on 12% and 18% GST payment.

Punit Gupta

Punit Gupta (Expert)

19 June 2020 Mr Seetharaman sir,
Correction to Ans. 3rd-
Section 17(5)(d) restrict ITC on goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business.

So any ITC cannot be claimed on inputs used for construction of Building.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

19 June 2020 Yes, agree with you no ITC can be claimed.

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