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GSTCase18 Tax rate on supply of pure food items

GSTCase-18- Tax rate on supply of pure food items

This article is in series of my updates on advanced rulings. Today I will be discussing the advance ruling by AAR Uttrakhand. This Advanced ruling is for tax rate on supply of food items. How the tax on food items will be determined when sold in a restaurant. It is very important issue. In eating outlets food items are sold. They don’t have portion of service. e.g. if someone buy a coke bottle. Generally bakery and beverages are taxable as a higher rate. But services of selling food items are taxable at 5%.

GSTCase-18- Tax rate on supply of pure food items by a sweetshop cum restaurant -Kundan Misthan Bhandar (GST AAR Uttarakhand)-Part I

1. Query: 

Whether supply of pure food items such as sweetmeats, namkeens, cold drink, Jalebi, Chola Bhatura and other edible items (may or may not be consumed at the premises) from a sweetshop which also runs a restaurant located on the first floor is a transaction of supply of goods or a supply of service and what is the applicable tax rate on such supply. 


2. Facts : 

The applicant has a sweetshop on ground floor and a restaurant on first floor of the same building. The applicant supplies sweetmeats, namkeens, Dhokla etc. commonly known as snacks, cold drinks, ice creams and other edible items alongwith ready to eat (partially or fully pre-cooked/ packed) items from live counters such as jalebi, chola bhatura and other edible items. In some cases, applicant also supplies sweetmeats or namkeens to a person sitting in the restaurant of a sweetshop when such products are not consumed within the premises of the applicant but are takeaway.

3. Observation: 

AAR observed that for a sweet shop cum restaurant, services from restaurant is a principle supply which provides a bundled supply of preparation & sale of food, and serving the same and therefore it constitutes a composite supply whereby restaurant services is the main supply and the other supplies are in the nature of incidental or ancillary services. 

4. Held: 

Supply shall be treated as supply of service and sweet shop shall be treated as extension of the restaurant in as much as the said activity covered under Schedule II of the Act. The services fall under Heading 9963 of (GST rates on services under Notification No. 11/2017- Central Rate (Tax) dated 28.06.2017 and rate of GST on aforesaid activity shall be 5%, on the condition that credit of input tax charged on goods and services used in supplying the said service has not been taken. All items including takeaway items from the said premises shall attract GST of 5%.

5. Comment: 

The judgement involves two critical issues i.e. classification of supply as supply of goods or service and tax rate thereof. The detailed analysis on the given judgement would be posted in next part of the post. Thus the Tax rate on supply of pure food items will be the rate of principal supply. It will be 5% even for food items irrespective of their rate.
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