2023 (3) TMI 54 - AAR - GST

Classification of supply - rate of tax - supply of ice cream from any of the outlets of HRPL - to be considered as supply of restaurant services or not? - applicable rate of tax thereon in accordance with notification No. 11/2017-CT(Rate) dtd 28.6.2017 as amended from time to time. If not the restaurant services, supply of ice cream from any of the outlets of HRPL can be considered as supply of ice cream from ice cream parlour chargeable to GST @ 18%? HELD THAT - The outlets of the applicant selling already manufactured ice-cream, do not engage in any form of cooking. As already discussed above, restaurant service involves the aspect of cooking/preparing during the course of providing service. Hence, as recommended by the Council, supply of ice-cream not prepared, cooked by the outlets of the applicant, stands on a different footing than restaurant service. Further, their activity entails supply of ice cream as goods a manufactured item and not as a service, even if certain ingredients of service are present. Ice cream sold by the outlets of the applicant are already manufactured ice-cream; that it is not their case that the ice cream were manufactured/cooked/prepared by them; that the applicant is on record that their ice cream division was sold way back in the year 2017 therefore ice cream sold by the applicant s outlet would not fall within the ambit of restaurant service and is supply of goods and hence would attract GST at the rate of 18%. When an ice cream is ordered as a desert along with cooked or prepared food at their outlets - whether it would be treated as supply of goods or supply of services? - HELD THAT - Under GST, a composite supply mean a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply. Here, principal supply means supply of goods or service which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary. Likewise, a mixed supply means two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply. Supply of ice cream, as a desert by the outlets of the applicant along with cooked or prepared food is therefore, naturally bundled and supplied in conjunction with the principal supply i.e. cooked/prepared food, in the ordinary course of business. Thus, the supply of ice cream along with cooked or prepared food, falls within the ambit of restaurant service.

Summary

Issues Involved:
1. Classification of supply of ice cream from the applicant's outlets as 'restaurant services'.
2. Applicable rate of GST on supply of ice cream if classified as 'restaurant services'.
3. Classification and GST rate if the supply of ice cream is considered as supply from an ice cream parlour.

Issue-wise Detailed Analysis:

1. Classification of Supply of Ice Cream from the Applicant's Outlets as 'Restaurant Services':

The applicant operates three types of outlets: '1944 the HOCCO Kitchen', 'The HOCCO Eatery', and 'Huber and Holly'. These outlets serve a variety of food items including ice creams, which are not prepared by the applicant but are sold as pre-packaged products. The primary question is whether the supply of ice cream from these outlets constitutes 'restaurant services'.

The Authority for Advance Ruling (AAR) examined the definition of 'restaurant services' as per Notification No. 11/2017-Central Tax (Rate) and subsequent amendments, which includes services provided by restaurants, cafes, and similar facilities, including takeaway services, room services, and door delivery of food. The AAR referred to CBIC Circular No. 164/20/2021-GST, which clarifies that 'restaurant service' involves cooking and supplying food, whereas ice cream parlours sell already manufactured ice creams without any cooking involved.

The AAR concluded that the applicant's outlets selling already manufactured ice creams do not engage in cooking, thus, the supply of ice cream does not qualify as 'restaurant services'. Instead, it is considered a supply of goods.

2. Applicable Rate of GST on Supply of Ice Cream if Classified as 'Restaurant Services':

The applicant contended that they should be liable for GST at 5% by treating the supply of ice cream as 'restaurant services' without availing Input Tax Credit (ITC). However, the AAR clarified that since the supply of ice cream from the outlets does not involve cooking or preparation, it does not fall under 'restaurant services' and thus does not qualify for the 5% GST rate applicable to restaurant services.

3. Classification and GST Rate if the Supply of Ice Cream is Considered as Supply from an Ice Cream Parlour:

The AAR referred to CBIC Circular No. 164/20/2021-GST, which states that ice cream parlours selling already manufactured ice cream are not considered restaurants and their activity is classified as the supply of goods. This classification attracts GST at the rate of 18%.

The AAR further clarified that if ice cream is supplied along with cooked or prepared food, it constitutes a composite supply, with the principal supply being the prepared food. In such cases, the supply is classified as 'restaurant services' and attracts GST at 5% without ITC as per Notification No. 11/2017-CT (Rate) as amended by Notification No. 20/2019-CT (Rate).

Ruling:

1. The supply of ice cream from the applicant's outlets cannot be considered as 'restaurant services'. Readily available ice creams sold over the counter are classified as the supply of goods.
2. When ice cream is ordered and supplied along with cooked or prepared food, it constitutes a composite supply, with the principal supply being the prepared food, thus qualifying as 'restaurant services' and attracting GST at 5% without ITC.
3. The supply of only ice cream, which is not prepared in the outlets and is readily available, is akin to the supply from an ice cream parlour and is leviable to GST at 18%.