Input Tax Credit on food and beverages has been one of the most litigated areas under GST. Section 17(5) of the CGST Act clearly blocks ITC on food and beverages, except in narrowly defined situations. For event management companies, this restriction often results in significant tax cost.
In January 2026, the West Bengal Authority for Advance Ruling (AAR) delivered an important ruling in the case of Citius Holidays Private Limited. The ruling clarifies when ITC on food and beverages is available to an event management service provider.
The outcome is favourable, but it is also nuanced. The AAR grants relief only when specific legal and factual conditions are satisfied. This article explains the ruling in detail, highlights built‑in limitations, and addresses common implementation risks.
Factual Background of the Case
The applicant was engaged in event management and tours and travel services. Its business model involved providing corporate clients with end‑to‑end event solutions, which typically included:
- Booking hotel accommodation for participants
- Arranging conference halls and banquet facilities
- Providing food and beverages such as meals, snacks, tea, and refreshments
- Charging clients a consolidated event management fee
Hotels supplying these facilities issued either:
- A single consolidated invoice for accommodation, hall, and food, or
- An itemised invoice showing multiple components
The applicant sought an advance ruling on whether ITC on food and beverages could be claimed in such circumstances.
Legal Provisions Involved
The dispute revolved around two core provisions of the CGST Act:
- Section 17(5)(b)(i), which blocks ITC on food and beverages; and
- The proviso to Section 17(5)(b)(i), which allows ITC when such services are used:
- for making outward taxable supplies of the same category, or
- as an element of a taxable composite or mixed supply
The interpretation of this proviso was central to the case.
Core Finding: Event Management Is a Composite Supply
The AAR undertook a detailed analysis of what constitutes event management services.
It observed that event management, by its very nature, involves multiple services supplied together in the ordinary course of business. These services are naturally bundled and provided in conjunction with each other.
Based on this, the Authority held that:
- Event management services constitute a composite supply under Section 2(30) of the CGST Act
- The principal supply is event management
- Food and beverages, hotel accommodation, and conference facilities are ancillary supplies
Once this finding was established, the ITC analysis followed logically.
Why ITC on Food and Beverages Was Allowed
The AAR held that although food and beverages are normally blocked credits, the proviso to Section 17(5)(b)(i) clearly applies in this case.
The key reasoning was as follows:
- The applicant makes an outward taxable supply of event management services
- Food and beverages are supplied only as an element of that composite supply
- The food is not for personal consumption
- The inward supplies are used entirely in the course of business
Accordingly, the AAR ruled that ITC on food and beverages is admissible, subject to compliance with Section 16 of the CGST Act.
Separate Invoice Not Required for Availing ITC
A major practical concern addressed by the ruling was invoice structure.
The AAR categorically held that:
- There is no requirement under GST law to obtain separate invoices for food and beverages
- A single consolidated invoice from the hotel is sufficient
- Even invoices issued under a single head such as “conference package” or “banquet package” do not affect ITC eligibility
What matters is the substance of the supply, not the manner in which it is described on the invoice.
Re‑Invoicing Food with Margin Does Not Block ITC
The applicant also presented a scenario where:
- The hotel raised a separate invoice for food and beverages
- The applicant charged the client for such food along with a margin
The AAR clarified that:
- Charging a margin does not change the nature of the supply
- Food continues to be used in furtherance of business
- ITC remains admissible
However, the Authority added an important clarification. If food is supplied as an element of a composite event management service, the applicant’s outward invoice must charge GST based on the principal supply, not treat food as a standalone supply.
Critical Conditions Embedded in the Ruling
While the ruling is beneficial, it is not unconditional. Several embedded caveats require attention.
1. Compliance with Section 16 Is Mandatory
The AAR repeatedly emphasised that ITC is available only if all conditions of Section 16(2) are satisfied. These include:
- Possession of a valid tax invoice
- Actual receipt of services
- Tax paid by the supplier to the government
- Filing of returns by the recipient
Failure in procedural compliance can override the benefit of the proviso to Section 17(5).
2. GST Rate Charged by the Hotel Is Relevant
The AAR specifically stated that ITC is available subject to the condition that the hotel charges tax applicable to the principal supply.
This observation introduces a practical risk. If a hotel applies a concessional rate under an applicable notification, or structures its supply in a manner that restricts ITC at the supplier level, the credit chain may break.
Businesses must therefore review hotel invoices carefully rather than assume automatic eligibility.
3. Composite Supply Must Exist in Reality
The decision is fact‑specific. If food and beverages are supplied independently, optionally, or as a separable service, the composite supply argument weakens.
Contracts, purchase orders, and billing structure must reflect that food is an integral part of the event service.
4. No Ruling on “Correct Method of Invoicing to Clients”
The AAR expressly declined to answer the question on the correct method of invoicing to clients, holding it to be outside the scope of Section 97(2).
As a result, the ruling cannot be cited as authority for mandating a particular invoicing style. Businesses must independently ensure that their invoicing reflects the true character of the supply.
Practical Compliance Guidance for Event Managers
To safely rely on this ruling, event management businesses should:
- Maintain clear linkage between hotel invoices and taxable client events
- Ensure outward supplies are taxed as event management services
- Retain contracts, agendas, attendee lists, and work orders
- Validate GST rates applied by hotels before availing ITC
- Avoid structuring food as a separate concessional outward supply when claiming composite supply benefits
Strong documentation remains critical in defending ITC claims during audits.
Conclusion
The West Bengal AAR ruling provides meaningful relief to event management companies burdened by blocked credits on food and beverages.
It confirms that ITC is available when food forms an integral part of a taxable composite event management service. At the same time, it reinforces a key GST principle: benefits follow substance, not labels.
Businesses that align their contracts, invoicing, and compliance systems with the reasoning in this ruling can legitimately reduce their GST cost. Those who apply it mechanically, without attention to conditions, may still face disputes.
Used carefully, this ruling is a powerful tool. Used carelessly, it can become a liability.
Source:
West Bengal GST AAR Ruling dated 16/01/2026: Citius Holidays Private Limited