2019 (10) TMI 866 - AAR - GST

Classification of supply - composite supply or not - supply of ice creams, chocolates, ice cream cakes, and pizza cakes in an IBACO outlet - principal supply is the supply of goods namely the ice cream and other products while the services supplied namely the air conditioned place, place to sit, the service of mixing various ice creams being naturally bundled in the ordinary course of business - serial no. 6(b) of schedule II of CGST Act and serial no. 6(b) of Schedule II of Karnataka GST Act - Whether the said supply will be classified under chapter 9963 and chargeable to 5% GST rate in accordance with serial no. (ii) of N/N. 46/2017 dated 14.11.2017 - Central Tax (Rate) read with serial no. 7(iv) of N/N.11/2017 dated 28.06.2017 and similar notification under KGST Act? HELD THAT - The transaction of the applicant is examined and found that the applicant is supplying ice cream and other items of food which are made to order along with certain services. Hence the applicant is supplying both services and goods and they are naturally bundled - Since the supplies made by the applicant in IBACO outlets involve both supplies of goods and services, with one of them as principal supply, the same has to be considered as a composite supply. The composite supply of goods being food or any other article for human consumption or any drink, where supply or service is for a consideration, then such composite supply shall be treated as a supply of services. Since the applicant is supplying ice creams, which are items for human consumption, by way of or as part of any service or in any other manner, the composite supply has to be treated as a supply of services. The applicant is supplying items of food as a part of service and since the provision of eating in the premises is provided or the customers may take the same away from the applicant s place, the transactions under question are covered under the amended provision of Entry 7(i) of Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017 as amended by Notification No.46/2017 - Central Tax (Rate) dated 14.11.2017 and attracts a tax of 2.5% without any input tax credit.

Summary

Issues Involved:
1. Classification of supply of ice creams, chocolates, ice cream cakes, and pizza cakes as a composite supply.
2. Determination of whether the supply is covered under serial no. 6(b) of Schedule II of the CGST Act and KGST Act.
3. Classification under chapter "9963" and applicable GST rate.

Issue-wise Detailed Analysis:

1. Classification of Supply as Composite Supply:

The applicant, a private limited company registered under the GST Act, sought an advance ruling on whether the supply of ice creams, chocolates, ice cream cakes, and pizza cakes in an IBACO outlet can be classified as a composite supply under section 2(30) of the CGST Act and KGST Act. The applicant argued that their offerings, which include air-conditioned seating, service of mixing various ice creams, and other amenities, naturally bundle with the supply of goods in the ordinary course of business. The ruling confirmed that the supply involves both goods and services that are naturally bundled, making it a composite supply as per section 2(30) of the CGST Act.

2. Coverage under Serial No. 6(b) of Schedule II:

The applicant contended that their supply should be deemed a supply of service as per serial no. 6(b) of Schedule II of the CGST Act and KGST Act, which treats certain composite supplies as services. The ruling agreed, stating that the composite supply of goods being food or any other article for human consumption, where such supply or service is for consideration, should be treated as a supply of services. This was supported by the definition and provisions of composite supply under Schedule II of the CGST Act.

3. Classification under Chapter "9963" and Applicable GST Rate:

The applicant sought clarification on whether the supply would be classified under chapter "9963" and subject to a 5% GST rate as per Notification No. 46/2017 dated 14.11.2017, read with Notification No. 11/2017 dated 28.06.2017. The ruling confirmed that the supplies are classified under chapter "9963" and are chargeable to a tax rate of 2.5% without any input tax credit, as per entry no. 7(i) of Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017, as amended by Notification No. 46/2017 - Central Tax (Rate) dated 14.11.2017. This applies to both the CGST Act and KGST Act.

Ruling:

1. The supply of ice creams, chocolates, ice cream cakes, and pizza cakes made as per customer orders and served in IBACO outlets qualifies as a composite supply under section 2(30) of the CGST Act and KGST Act.
2. The composite supply is deemed to be a supply of service as per entry 6(b) of Schedule II to the CGST Act and KGST Act.
3. The supplies are classified under chapter "9963" and are chargeable to a tax rate of 2.5% subject to the conditions under the CGST Act and KGST Act, as per entry no. 7(i) of Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017, as amended by Notification No. 46/2017 - Central Tax (Rate) dated 14.11.2017.