2021 (3) TMI 1093 - AAR - GST

Classification of Supply - sale from the portion of the sweetmeats and bakery shop - input tax credit - supply of food items and beverages from the facility which offers the opportunity of eating at the same premises - can be classified as restaurant services attracting a rate of GST of 5% or not? - input tax credit be availed on restaurant service - receipt of common input tax credit in the form of inputs, input services and capital goods, will amount of reversal of input tax credit or not - catering services provided to the educational institution, is exempt supply or not. Supply of food and beverages from the sweetmeats counter by the applicant - HELD THAT - Supply of food and beverages from the sweetmeats counter by the applicant, where the customers have not been provided with any services in relation to consume the same in the premises, shall be categorized as supply of goods and the applicant is eligible to avail input tax credit in respect of such supply of goods subject to conditions as laid down in Chapter V of the GST Act and rules made there under - It appears from the mode of business as carried out by the applicant that when goods are supplied from the sweetmeats parlour without any element of supply of services or as a part of any services, it cannot be considered as a composite supply . Such supplies shall be treated as supply of goods and shall attract tax accordingly. Restaurant services or not - Supply of food items and beverages by the applicant which offers the facility of eating in the same premises along with takeaway - HELD THAT - Supply of food and beverage items made in the restaurant or as takeaways from the restaurant counter having an element of supply of services shall qualify as composite supply . The principal supply being the supply of restaurant service, tax on such supply shall be levied according to entry serial number 7 of the Notification No. 11/2017- Central Tax (Rate) dated the 28th June, 2017, as amended from time to time (corresponding West Bengal State Notification No. 1135 F.T. dated 28.06.2017). Supply of catering services to an educational institution - HELD THAT - The term catering has not been defined under the GST Act. In Cambridge Dictionary, catering is defined as any job making or serving food. In Collins Dictionary, catering has been defined as the activity or business of providing food for people - In the present case, the applicant provides catering services to an educational institution which provides education services up to secondary school. Reference may be drawn to para 2 of the Circular No. 85/04/2019-GST dated 01.01.2019 issued by the Tax Research Unit, Department of Revenue, Ministry of Finance, Government of India, where it has been clarified that A supply which is specifically covered by any entry of Notification No. 12/2017-Central Tax (Rate) dated 28-06-2017 is exempt from GST notwithstanding the fact that GST rate has been prescribed for the same under Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. - thus, Supply of catering services to an educational institution providing education services up to higher secondary school or equivalent, therefore, shall get covered under the entry serial number 66 (b)(ii) of the Exemption Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 and shall be exempted from payment of tax. Outdoor Catering services or not - Supply of food and beverages to the auditor, guests/ parents on programme days - HELD THAT - The agreement made between the applicant and Sri Sri Academy also requires the applicant to provide food and beverages to the auditor, guests, guests /parents on programme days. Evidently such supplies of services are event based and occasional in nature and falls under the category of outdoor catering . The supply, therefore, shall attract tax @ 5% vide entry serial number 7(iv) of the Notification No. 11/2017- Central Tax (Rate) dated the 28th June, 2017, as amended from time to time (corresponding West Bengal State Notification No. 1135 F.T. dated 28.06.2017, as amended from time to time) without credit of input tax charged on goods and services used in supplying the services. Input Tax Credit - HELD THAT - The applicant shall follow the principle of apportionment of credit as laid down in sub-section (1) and (2) of section 17 of the GST Act read with rule 42 and 43 of the CGST/WBGST Rules, 2017 in respect of common input tax credit in the form of inputs, input services and capital goods.

Summary

Issues Involved:
1. Categorization of sales from the sweetmeats and bakery shop as supply of goods.
2. Eligibility for input tax credit on the sale of items from the sweetmeats and bakery shop.
3. Classification of supply of food items and beverages from the restaurant facility as restaurant services attracting a 5% GST rate.
4. Eligibility for input tax credit on restaurant services.
5. Requirement for reversal of input tax credit in terms of Rule 42 and 43 of the CGST Rules 2017 for common input tax credit.
6. Qualification of catering services provided to an educational institution as an exempt supply.

Detailed Analysis:

1. Categorization of Sales from Sweetmeats and Bakery Shop as Supply of Goods:
The applicant operates a business with two distinct sections: a sweet parlour for selling sweetmeats, namkeens, and bakery items as takeaways, and a restaurant for preparing and serving fast food snacks and beverages. The applicant argues that the sales from the sweet parlour should be considered as supply of goods since there is no service element involved. The Authority agrees, stating that when goods are supplied from the sweetmeats parlour without any service element, it cannot be considered a composite supply. Such supplies are treated as supply of goods and attract tax accordingly.

2. Eligibility for Input Tax Credit on Sales from Sweetmeats and Bakery Shop:
The Authority rules that the applicant is eligible to avail input tax credit for supplies from the sweetmeats counter, provided the conditions laid down in Chapter V of the GST Act and rules are met.

3. Classification of Supply of Food Items and Beverages from Restaurant Facility as Restaurant Services:
The applicant contends that serving fast food snacks and beverages, whether consumed on the premises or taken away, should be classified as restaurant services. The Authority concurs, stating that such supplies qualify as composite supplies with the principal supply being restaurant service. Tax on such supplies is levied according to entry serial number 7 of Notification No. 11/2017- Central Tax (Rate), attracting a 5% GST rate, provided input tax credit on goods and services used in supplying the service has not been availed.

4. Eligibility for Input Tax Credit on Restaurant Services:
The applicant agrees to the condition that input tax credit is not available for restaurant services as per the relevant notification. The Authority confirms this, aligning with the applicant's acceptance of the non-availability of input tax credit for restaurant services.

5. Requirement for Reversal of Input Tax Credit for Common Inputs:
The applicant acknowledges the necessity to reverse input tax credit where common inputs, input services, and capital goods are used for both premises. The Authority directs the applicant to follow the principles of apportionment of credit as laid down in Section 17(1) and (2) of the GST Act, read with Rule 42 and 43 of the CGST/WBGST Rules, 2017.

6. Qualification of Catering Services to Educational Institution as Exempt Supply:
The applicant provides catering services to an educational institution offering education up to secondary school. The Authority refers to Notification No. 12/2017- Central Tax (Rate) and Circular No. 85/04/2019-GST, concluding that catering services to such an institution are exempt from GST. However, catering services provided to auditors, guests, and parents on program days are classified as 'outdoor catering' and attract a 5% tax rate under entry serial number 7(iv) of Notification No. 11/2017- Central Tax (Rate), without the benefit of input tax credit.

Ruling:
1. Sales from the sweetmeats counter are categorized as supply of goods, and the applicant is eligible for input tax credit subject to conditions.
2. Supply of food items and beverages from the restaurant is treated as restaurant services, attracting a 5% GST rate without input tax credit.
3. Catering services to the educational institution are exempt from tax.
4. Catering services to auditors, guests, and parents on program days are treated as 'outdoor catering' and attract a 5% tax rate without input tax credit.
5. The applicant must follow the apportionment principles for common input tax credit as per Section 17 and Rules 42 and 43 of the CGST/WBGST Rules, 2017.

This ruling is valid subject to the provisions under Section 103 until declared void under Section 104(1) of the GST Act.