2023 (1) TMI 84 - AAR - GST

Classification of services - food and beverages prepared and supplied by the Applicant to its customers whether consumed in the restaurant or by way of takeaway qualifies - readily available food and beverages (not prepared in the restaurant) sold over the counter by the Applicant to the customer whether consumed in the restaurant or by way of takeaway - restaurant services or not? - classifiable under SAC '996331 or not - input tax credit as per Sr. No. 7(ii) of Notification No. 11/2017-Central Tax (Rate) dated June 28, 2017, read with Sr. No. 7(ii) of Notification No. 11/2017-State Tax (Rate) dated June 30, 2017? HELD THAT - The food and beverages prepared/cooked in the restaurant and supplied by the Applicant to its customers either consumed in the restaurant or by way of takeaway qualifies as 'restaurant services. The restaurant service is classifiable under SAC '996331 Services provided by restaurants, cafes and similar eating facilities including takeaway services, room services and door delivery of food' - the restaurant service is leviable tax rate of GST @ 5% with no input tax credit as per Sr. No. 7(ii) of Notification No.11/2017 - Central Tax (Rate) dated June 28. 2017, read with Sr. No. 7(ii) of Notification No. 11/2017 - State Tax (Rate) dated June 30, 2017. The readily available food items (not prepared/cooked in the restaurant) sold over the counter by the Applicant to the customer whether consumed in the restaurant or by way of takeaway does not qualify as 'restaurant services' instead of falls under supply of goods which is liable to applicable rate of GST Tax - The readily available food and beverages (not prepared in the restaurant) sold over the counter by the Applicant is supply of goods which is liable to applicable rate of GST Tax and does not qualify as restaurant services.

Summary

Issues Involved:
1. Classification of food and beverages prepared and supplied by the Applicant as 'restaurant services'.
2. Classification of readily available food and beverages (not prepared in the restaurant) sold over the counter by the Applicant as 'restaurant services'.

Issue-wise Detailed Analysis:

1. Classification of food and beverages prepared and supplied by the Applicant as 'restaurant services':

The Applicant, engaged in the restaurant business, prepares food and beverages in their kitchen and supplies them to customers, either for consumption on the premises or as takeaway. The Applicant contends that these services qualify as 'restaurant services' under SAC 996331, which includes services provided by restaurants, cafes, and similar facilities, including takeaway services, room services, and door delivery of food, and are liable to GST at 5% without input tax credit (ITC) as per Sr. No. 7(ii) of Notification No. 11/2017 - Central Tax (Rate).

The Authority for Advance Ruling (AAR) examined the definitions and clarifications provided in the relevant notifications and circulars. Explanation (xxxii) of paragraph 4 of the Services Rate Notification defines 'restaurant service' as the supply of goods, being food or any other article for human consumption or any drink, provided by a restaurant, eating joint, including mess, canteen, whether for consumption on or away from the premises where such food or drink is supplied.

The AAR also referred to Circular No. 164/20/2021-GST dated October 6, 2021, which clarifies that 'restaurant service' includes takeaway services and door delivery services for consumption of food. The GST Council's 23rd meeting minutes further supported this interpretation, stating that all standalone restaurants, irrespective of being air-conditioned or otherwise, shall attract a tax rate of 5% without ITC, and food parcels (or takeaways) from restaurants shall also attract the same tax rate.

Based on these references, the AAR concluded that the food and beverages prepared in the restaurant and supplied to customers, whether consumed on the premises or taken away, qualify as 'restaurant services' and are classifiable under SAC 996331. The applicable GST rate is 5% without ITC.

2. Classification of readily available food and beverages (not prepared in the restaurant) sold over the counter by the Applicant as 'restaurant services':

The Applicant also sells readily available food and beverages, not prepared in the restaurant, over the counter. The Applicant argued that these items should also be classified as 'restaurant services' and attract GST at 5% without ITC.

However, the AAR found that the supply of readily available food items purchased from the market and sold over the counter does not fall under 'restaurant services'. Instead, these items are considered as the supply of goods. The AAR referred to the ruling in the case of M/s Kundan Mishthan Bhandar by the Appellate Authority for Advance Ruling, Uttarakhand, which distinguished between items prepared in the restaurant and those purchased from outside and sold over the counter. The ruling stated that items not prepared in the restaurant but sold over the counter are treated as the supply of goods with applicable GST rates.

Therefore, the AAR held that the readily available food and beverages (not prepared in the restaurant) sold over the counter by the Applicant do not qualify as 'restaurant services' but are considered the supply of goods, liable to the applicable GST rate for those items.

Ruling:

1. The food and beverages prepared and supplied by the Applicant to its customers, whether consumed in the restaurant or by way of takeaway, qualify as 'restaurant services' and are classifiable under SAC 996331. They are leviable to GST at 5% with no input tax credit as per Sr. No. 7(ii) of Notification No. 11/2017 - Central Tax (Rate) dated June 28, 2017, read with Sr. No. 7(ii) of Notification No. 11/2017 - State Tax (Rate) dated June 30, 2017.

2. The readily available food and beverages (not prepared in the restaurant) sold over the counter by the Applicant are considered the supply of goods and are liable to the applicable rate of GST tax. They do not qualify as 'restaurant services'.