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Issue Id: - 115439
Dated: 19-9-2019
By:- Sadanand Bulbule

  • Contents

Dear Sir/s

Following is the query.

Here in Bengaluru in one of the food courts,in addition to the supply of food & drinks, there is also the facility of supply of " assorted hookah flavours" to the desired smokers for smoking in the said premises. The food court is charging 5% GST on the supply value of food& drinks without availing ITC.However the food court is purchasing " assorted hookah flaours " the classified tobacco product from the local vendor who is charging 28% GST and 72% Cess as notified and classified as Tobacco products under HSN. 2403 11 10. But while re-supplying assorted hookah flavaours, the food court is charging only 5% GST separately on the value of hookah and for the supply of food& drinks and hookah flavours.

My understanding is "hookah flavours" being specific tobacco product unconnected with food& drinks does come under classification of supply of food & drinks eligible for 5% GST with or without ITC. Mere change in the location of supply of hookah as such would not alter the rate of GST with the nature of hookah flavours being intact till it is supplied to the desired smoker. The value of addition is very very huge in respect of re-supply of hookah flavours in the hands of the food court. Therefore it may be an attempt to escape the higher rate of GST at 28% with 72% Cess on the outward supply value of such hookah flavours.

Kindly enlighten whether this kind of practice of charging reduced rate of GST at 5% on the outward supply hookah flavours by the food court to end smokers for smoking in its business premises is right? And under what provisions?

Profound regards.

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Posts / Replies

Showing Replies 1 to 6 of 6 Records

1 Dated: 20-9-2019
By:- Ganeshan Kalyani

In my view, it is composite supply and therefore rate of main supply will apply.

2 Dated: 21-9-2019

Full facts are not known to me in this query. However, main issue is whether hookah flavour is a part of composite supply or not. If hookah flavour is part of composite supply, 5% rate is correct and the valuation aspect also appears to be in order.

3 Dated: 22-9-2019

In continuation of my reply dated 21.9.2019 at serial no.2 above, an illustration is given below:-

Suppose one visits restaurant for lunch and thereafter he orders for cigarettes. The owner of restaurant supplies cigarettes. The owner supplies one or two cigarette or one pack. This supply of cigarette is not 'as such' it is being sold in retail in pieces. Food is his main (primary) supply and supply of cigarette is secondary supply. Thus it becomes a composite supply and rate of main supply is applicable as rightly opined by Sh.Ganeshan Kalyani, Ji.

Had the restaurant owner sold a carton of cigarette or hooka flavours independently/separately, then such supply would have attracted higher rate of tax (GST 28% plus 72% cess) after value addition as suggested by the querist.

It is natural that if GST is paid @ 5% , no ITC would be taken.

4 Dated: 22-9-2019
By:- Sadanand Bulbule

Sethi Sir

Very Good Morning.

In continuation of your additional clarification, the following facts are offered for ease of understanding the issue under reply.

The business place is a high end Cafe supplying hookah flavours and the supply of coffee,tea,snacks etc., independently. They are not in conjunction with each other. The charges for one flavour of hookah is ₹ 1000/- and for snacks or coffee, the charges range from ₹ 150/- to ₹ 300/- There is also combo offers like, if anyone takes two hookah, two coffees are supplied as complimentary and the so on. The prices are charged along with 5% GST for hookah and snacks separately in a single Tax Invoice.

One actual example:

The total amount of ₹ 1612/- is shown at the bottom of the bill indicating separately, ₹ 1000/- as cost of hookah, food cost ₹ 435/- , ₹ 100/- towards Service Charges ( it is nothing but TIPS at gunpoint) and ₹ 38.38 SGST and CGST each for the whole amount @ 2.5%. In this scenario, whether dealer though not claiming ITC both on hookah & food times purchases, is he entitled to charge and collect GST 5 % ? The value addition in respect of hookah is 20 times.

As observed by the experts, would it still be Composite Supply or can be classified as Mixed Supply? Clarification is solicited since revenue implications are very huge.

Happy Sunday.

5 Dated: 22-9-2019
By:- Sadanand Bulbule

Pl read food items in place of food times.

6 Dated: 23-9-2019

It is not ethical for me to go beyond what I have already expressed. There is no dearth of learned Advocates and Consultant for an assessee to consult and there is no dearth of learned officers in the department to detect short payment of tax. I should mind my own business.


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