Restaurant Supply, Goods and Services Tax - GST

[VENU K]

After the 46th constitutional amendment of Article 366 by inserting Clause 29 A, Sub clause "f" of Indian Constitution treats sale of food etc as sale of goods as reproduced below.

Article 366 Clause (29A) “tax on the sale or purchase of goods” includes

(a)

(b)

............

(f) a tax on the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration, and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made;]

In GST such supply is treated as a service by the deeming provision of Schedule II Para 6 Clause b.

Schedule II

6. Composite Supply

The following composite supplies shall be treated as supply of services namely :-

(a) .......

(b) Supply by way of or as part of any service or in any other manner whatsoever, of goods being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption) whether such supply is for cash, deferred payment or other valuable consideration.

Interestingly the deeming provisions starts with the wordings " The following composite supplies shall be treated as supply of services namely."....

Further Sec 2 (30) defines composite supply as a combination of two or more taxable supplies naturally bundled and supplied in conjunction with each other..........

Therefore it naturally follows that to be a composite supply there has to be supply of a minimum of two taxable goods or services and logically, even if the definition do not say so, such supply should also be for a single price.

Based on this logic is it possible to treat a la carte order in a restaurant as sale of goods as it is not a composite supply ? Can the hotel bill it as supply of goods at respective tariff rate with full IPT ?

To take an example an order of two rotis plus daal fry is not a composite supply as they are offered at separate price and hence it should be taxed as per the tariff rates as goods with full input tax credit.

A buffet lunch is a composite supply as it is a supply involving a number of taxable goods and services naturally bundled and offered at a single price and therefore is undoubtedly taxable at five percent without IPT as per the deeming provision in Sch II.

Please note that the 46th amendment to the Constitution was made to overcome, among other things, the SC decision in Associated Hotels of India (1972 (1) TMI 80 - SUPREME COURT)  which had held that food supply in a restaurant is not sale of goods and no sales tax could be levied on it.

Your opinions on this please.