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2020 (6) TMI 815 - AAR - GSTClassification of supply - supply of goods or a supply of service - composite supply or mixed supply - rate of tax - supply of pure food items such as sweetmeats, namkeens, cold drink and other edible items from sweetshop which also runs a restaurant - input tax credit - HELD THAT - The applicant has a sweetshop in the ground floor and a restaurant at the first floor of the same building. In a case where two or more goods or a combination of goods and services are involved or supplied together earlier under the Service Tax regime this mechanism was called bundled service which is rendering of a service or services with another element of service of services, wherein service tax law dealt with pure services and not with goods per se. In the changed regime of GST the concept introduced dealt with goods as well and is linked with the concept of Principal Supply. Under GST law, supplies which are bundled with two or more supplies of goods or services or combination of goods and services are classified, with distinct characteristics, as (i) Composite Supply (ii) Mixed Supply. As already discussed, Composite supply is ore where two or more goods or services or both are together, in a natural bundle and in a normal course of business, provided one of which is a principal supply. However, principal supply will be that supply which is predominant over other supplies - in order to identify -if the particular supply is a Mixed Supply, the first requisite is to rule out that the supply is a composite supply. A supply can be a mixed supply only if it is not a composite supply. As a corollary it can be said that if the transaction consists of supplies not naturally' bundled in the ordinary course of business then it would be a mixed Supply. Once the amenability of the transaction as a composite supply is ruled out, it would be mixed supply, classified in terms of a supply of goods or services attracting highest rate of tax. The activity of the applicant from their restaurant comes under the purview of restaurant services , falling under Heading 9963 leviable to GST rates on services as stipulated under Notification No. 11/2017-Central Rate (Tax) dated 28.06.2017 (as amended time to time) - the rate of GST on activity shall be 5% as on date. Input tax credit - HELD THAT - The applicant cannot avail credit on the GST paid on the goods and services used in their said activity in terms of notification. In case where goods are supplied to customers through sweetshop counter having no direct or indirect nexus with restaurant service i.e. any stand alone customer who visit such sweet shop exclusively for purchase of any item of any quantity across the counter without visiting the restaurant, the billings of such sales are also done separately, such exclusive sales to such exclusive stand alone customer across the counter cannot be clubbed with restaurant service, it being an exclusive transaction of supply of goods independent of restaurant service - These sales do not satisfy the basic requirement of a composite supply i.e. 'these cannot be treated as' being naturally bundled and supplied in conjunction with each other'. Such across the counter soles rom sweetshop definitely requires dissimilar treatment, it being completely independent of restaurant activity at such supply would continue unhindered, irrespective of whether the restaurant is dosed or open, either temporarily or permanently. Hence such sales will be treated as supply of goods with applicable GST rates on the items supplied / sold and for only such exclusive supplies input tax credit stands admissible. In case the goods supplied from the restaurant are billed under restaurant head then in such a situation such transaction will purely depend upon the constituents of each individual supply and as to whether same satisfies the conditions/ingredients of a composite supply' or 'mixed supply', as defined under section 2(30) and 2(74) of the CGST Act respectively.
Issues Involved:
1. Classification of supply of pure food items from a sweetshop that also runs a restaurant as supply of goods or services. 2. Determination of the nature and rate of tax applicable to items supplied from the ground floor of a sweetshop/restaurant. 3. Entitlement to input tax credit for the supplies made. Detailed Analysis: Issue 1: Classification of Supply The applicant sought a ruling on whether the supply of pure food items such as sweetmeats, namkeens, cold drinks, and other edible items from a sweetshop that also runs a restaurant is a transaction of supply of goods or a supply of service. The ruling clarified that the supply from the restaurant, including takeaways, falls under "composite supply" with the restaurant service being the principal supply. This classification is based on the fact that the supply of food in the restaurant is naturally bundled with the restaurant service. Issue 2: Nature and Rate of Tax The applicant sought clarification on the nature and rate of tax applicable to various items supplied from the ground floor of a sweetshop where a restaurant is also located on the first floor. The ruling specified that: - For items supplied in the restaurant or as takeaways from the restaurant counter, the applicable GST rate is 5%, provided that input tax credit is not availed. - The supply of food and beverages in the restaurant is classified under Heading 9963, which pertains to food and beverage services. The GST rate is governed by Notification No. 11/2017-Central Tax (Rate) dated 28/06/2017 and subsequent amendments. - For goods supplied exclusively from the sweetshop counter, without any connection to the restaurant service, the applicable GST rates for individual items will apply. These transactions are treated as a supply of goods, and input tax credit is allowed, provided separate bills and accounting records are maintained. Issue 3: Entitlement to Input Tax Credit The applicant inquired about the entitlement to input tax credit for supplies made. The ruling stated: - No input tax credit is available for supplies categorized under restaurant services (composite supply) as per the applicable GST rate notification. - Input tax credit is allowed for supplies made exclusively from the sweetshop counter, provided these are treated as independent transactions of goods and separate records are maintained. Conclusion: The ruling provided a clear distinction between supplies made from the restaurant and those from the sweetshop counter. Supplies from the restaurant, including takeaways, are treated as composite supplies with the restaurant service being the principal supply, attracting a GST rate of 5% without input tax credit. Supplies from the sweetshop counter, when independent of the restaurant service, are treated as supplies of goods with applicable GST rates, and input tax credit is allowed. The applicant must maintain separate records for restaurant and sweetshop transactions to avail the appropriate tax treatment and input tax credit.
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