2018 (7) TMI 1331 - AAR - GST

Classification of supply - Manufacturing food as take away only with no sitting facility, is a restaurant service or manufacturing of goods? - scope of supply . - Held that - Since the supply of cooked food is mentioned in the Schedule-II (Sr. no. 6(b)) it is a supply of service. Rate of GST under the composition scheme will be 5% (i.e. 2.5% under CGST and 2.5% under SGAT).

Summary

Issues:
1. Determination of whether manufacturing food for take-away without sitting facility constitutes a restaurant service or manufacturing of goods for GST purposes.

The judgment addresses the issue of whether the activity of manufacturing food for take-away without a sitting facility falls under the category of restaurant service or manufacturing of goods for GST purposes. The applicant argued that their activity does not fit the definition of a restaurant service as they do not provide sitting or dining services. They contended that their operation aligns more closely with the definition of manufacturing under the GST Act as they process raw materials to create a new product without providing any services. The applicant sought clarification on whether they should be considered a restaurant service under the Composition Scheme at a tax rate of 5% or a manufacturer under the Composition Scheme at a tax rate of 1%.

The judgment delves into the concept of composite supply, highlighting that the supply of goods for human consumption, whether as part of a service or otherwise, is treated as a supply of services under the GST Act. It also emphasizes that the scope of supply includes activities deemed to be the supply of goods or services as per Schedule II. The judgment further mentions the Composition Levy provision, which specifies different tax rates based on the nature of supplies made, with a specific rate applicable to supplies mentioned in Clause (b) of Schedule II.

In conclusion, the Advance Ruling Authority determined that the activity of manufacturing food for take-away without a sitting facility falls under the category of a restaurant service rather than manufacturing of goods for GST purposes. The Authority clarified that the provision of sitting service is not a prerequisite for an establishment to be considered a restaurant service. Therefore, the applicant's operation was classified as a restaurant service under the Composition Scheme, subject to a tax rate of 5%, as per the relevant provisions of the GST Act and the Composition Levy.