Can you claim full GST ITC if Partly NON GST supply is made

Video Explanation by CA Satbir Singh in Hindi

A person running a hotel and a liquor bar makes purchases for goods in respect of his hotel and bar . Is he entitled to full ITC keeping in view that his sales in the restaurant/bar includes NON GST sales in respect of liquor ?

Answer : only proportionate ITC can be availed

Refer Section 17 of CGST Act 2017

Apportionment of credit and blocked credits.

17. (1) Where the goods or services or both are used by the registered person partly for the purpose of any business and partly for other purposes, the amount of credit shall be restricted to so much of the input tax as is attributable to the purposes of his business.

(2) Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies.

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Refer Rule 42 of CGST Rules 2017

Manner of determination of input tax credit in respect of inputs or input services and reversal thereof

42. (1) The input tax credit in respect of inputs or input services, which attract the provisions of sub-section (1) or sub-section (2) of section 17, being partly used for the purposes of business and partly for other purposes, or partly used for effecting taxable supplies including zero rated supplies and partly for effecting exempt supplies, shall be attributed to the purposes of business or for effecting taxable supplies………….

Refer Rule 43 of CGST Rules 2017 :

Manner of determination of input tax credit in respect of capital goods and reversal thereof in certain cases

43. (1) Subject to the provisions of sub-section (3) of section 16, the input tax credit in respect of capital goods, which attract the provisions of sub-sections (1) and (2) of section 17, being partly used for the purposes of business and partly for other purposes, or partly used for effecting taxable supplies including zero rated supplies and partly for effecting exempt supplies, shall be attributed to the purposes of business or for effecting taxable supplies in the following manner, namely…………….