Facts:
M/s. Kundan Mishthan Bhandar (“the appellant”) is running sweetshop and a restaurant in two distinctly marked separate parts of same premises and also maintaining separate accounts and billings for the two types of business.
Issues Involved:
- Whether the supply of pure food items such as sweetmeats, namkeens, cold drinks and other edible items in the sweet shop which is also running a restaurant in the first floor is a transaction of supply of goods or services?
- What is the nature and tax rate applicable to the items supplied from the ground floor Sweetshop in which restaurant is located at the first floor and whether the applicant is entitled to claim benefit of input tax credit w.r.t snacks, ready to eat items supplied from live counter and takeaway orders of person sitting in the restaurant of sweet shop?
Observations and findings:
Earlier AAR of Uttarakhand stated that supply shall be treated as supply of service and the sweetshop shall be treated as an extension of the restaurant. All the items including takeaway items from the premises shall attract GST @5% subject to the condition of non-availment of Input tax credit charged on goods and services used in supplying the said service.
Further it was observed that, the nature of the business establishment for making supply of food, drinks and other articles for human consumption will not determine whether the same is a supply of goods or services but will depend on the constituents of each individual supply and whether same satisfies the conditions/ingredients of a ‘composite supply’ or ‘mixed supply’, as defined under section 2(30) and 2(74) of the CGST Act, respectively
‘Composite supply’, as defined under section 2(30) of the CGST Act, means 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.
Held:
The Hon’ble AAAR, Uttarakhand vide Appeal Nos. UK/GST ARA 02/10 & UK/GST ARA 03/08 dated February 27, 2019 Upholds that when the goods such as sweets, namkeens, cold drinks, and other edible items are supplied to customers in the restaurant as takeaway from the restaurant counter and which are being billed under restaurant sales head should fall under ‘composite supply’ with restaurant service is the principal supply. Since the supply of food, in this case, is naturally bundled with the restaurant service. The taxability of all such goods supplied to or through the restaurant will be governed by the principal service i.e. restaurant service and GST rate with applicable conditions will also be applicable to all such goods also. Input credit will not be allowed in this case.
Further, all goods which are supplied to customers through sweetshop counter have no connection with restaurant service. Anyone can come and purchase any item of any quantity from the counter without visiting the restaurant. The billings of such sales are also done separately. These sales do not satisfy the basic requirement of ‘composite supply’ i.e. ‘being naturally bundled and supplied in conjunction with each other’. These sales are completely independent of restaurant activity and will continue even when the restaurant is closed, either temporarily or permanently. Hence such sales will be treated as a supply of goods with applicable GST rates on the items sold. The input tax credit will be allowed on such supply.
Citation: [2019] 105 taxmann.com 364 (AAAR-UTTARAKHAND)