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TMI Blog2020 (10) TMI 853X X X X Extracts X X X X X X X X Extracts X X X X ..... tered under the GST Act 2017 vide GSTIN No. 33AABCM9267F1ZF. The Applicant owns and manages hotel and resorts. The applicant has preferred an application seeking Advance Ruling on the following questions: 1. What is the rate of tax applicable on the supply of Soft Beverages (Aerated Water) and Tobacco (Smokes) when these items are supplied independently and not as composite supply in the restaurant? In other words what is the rate of GST if these items alone are supplied and not along with food as Composite supply to the guest? 2. Whether supply of liquor is deemed to be the "exempt supply" under GST Act as per Section 2 (47) of CGST Act for the purpose of proportionate reversal of ITC as per Rule 42 of CGST rules 2017? 3. It is obligatory on the part of employer to supply free food to the employees. Whether such free supply of food is liable to reverse ITC on inputs as per Rule 42 of CGST Rules 2017? The Applicant has submitted the copy of application in Form GST ARA - 01 and submitted a copy of Challan evidencing payment of application fees of Rs. 5,000/ - each under Sub-rule (1) of Rule 104 of CGST rules 2017 and SGST Rules 2017. 2.1 The applicant has stated that they ow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtunity to be personally heard on 30.08.2019. The applicant appeared before the authority for Advance Ruling and stated that they supply soft beverages, filter cigarettes exceeding 75mm (HSN 2402 2090) in restaurant and in room service. This is mentioned in their menu for restaurant/bar room service. They stated that they will submit copies of menu and sample bills for each. They stated that they are charging 28% +cess whereas the clients demand to tax @18%. They are charging @18% on other room & restaurant service. In respect of the 2nd and 3rd question they stated that they wish to rephrase the question regarding taxability of liquor and Supply of free food to employees. They stated that they will submit copies of menu, invoices for restaurant/bar and room service. They further stated that they serve food to their employees in a separate canteen and separate food from their business. The canteen is run in-house, though procurements are common. They also stated that they will submit copies of a sample employee contract and all other documents mentioned within 2 weeks. 3.2 The applicant was extended another Personal hearing on 07.11.2019. They appeared and submitted the invoices f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The applicant in their application has sought ruling on the following questions: 1. What is the rate of tax applicable on the supply of Soft Beverages (Aerated Water) and Tobacco (Smokes) when these items are supplied independently and not as composite supply in the restaurant? In other words what is the rate of GST if these items alone are supplied and not along with food as Composite supply to the guest? 2. Whether supply of liquor is deemed to be the "exempt supply" under GST Act as per Section 2 (47) of CGST Act for the purpose of proportionate reversal of ITC as per Rule 42 of CGST rules 2017? 3. It is obligatory on the part of employer to supply free food to the employees. Whether such free supply of food is liable to reverse ITC on inputs as per Rule 42 of CGST Rules 2017? During Personal Hearing held on 30.08.2019, the applicant stated that in respect of 2nd and 3rd question, they wish to rephrase the questions and accordingly required ruling on 1. Taxability on Supply of Liquor in restaurant/bar and room service; and 3. Taxability on Supply of free food to their employees 6.1 The first question raised by the applicant is: What is the rate of tax applicable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reproduced below for reference: 7. (1) For the purposes of this Act, the expression "supply" includes- (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; (b) import of services for a consideration whether or not in the course or furtherance of business; and (c) the activities specified in Schedule I, made or agreed to be made without a consideration; (1A) where certain activities or transactions constitute a supply in accordance with the provisions of sub-section (1), they shall be treated either as supply of goods or supply of services as referred to in Schedule II.; Schedule-II of the GST Act at SI.No. 6, states as under:- 6. Composite supply The following composite supplies shall be treated as a supply of services, namely:- (a) works contract as defined in clause (119) of section 2; and (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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of Service. In this instance, supply of soft beverages/aerated waters being drinks (other than alcoholic liquor for human consumption) and articles for human consumption in as a part of any service is a composite supply of service. The payment in this case can be immediate or billed to the room for residents. The relevant Explanatory notes for the Classification of Services states: 99633 Food, edible preparations, alcoholic& non-alcoholic beverages serving services 996331 Services provided by Restaurants, Cafes and similar eating facilities including takeaway services, Room services and door delivery of food. 996332 Services provided by Hotels, IAN, Guest House, Clubs etc. including Room services, takeaway services and door delivery of food. It is seen that supply of soft beverage/ aerated waters by the restaurant whether to resident or non-resident guests, whether in person or room services, is a composite supply of service classifiable under SAC 996331. 6.4.3 The applicable CGST on such service is provided vide Sl.No.7 (iii) of Notification No. 11/2017-C.T. (Rate) dated 28.06.2017 which is as follows: S.No. Chapter, Section, Heading or Group Service Code (Tariff) Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst them in column (4) subject to conditions specified against them in column (5), which is a mandatory rate and shall not be levied at the rate as specified under this entry. (b) This entry covers supply of "restaurant service" at specified premises 9 Explanation to this notification states: "(xxxii) "Restaurant service" means supply, by way of or as part of any service, 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 any other article for human consumption or drink is supplied. (xxxv) "Declared tariff' means charges for all amenities provided in the unit of accommodation (given on rent for stay) like furniture, air conditioner, refrigerators or any other amenities, but without excluding any discount offered on the published charges for such unit. (xxxvi) "Specified premises" means premises providing "hotel accommodation" services having declared tariff of any unit of accommodation above seven thousand five hundred rupees per unit per day or equivalent.". In the instant case, the hotel being a 5 sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, the tax liability on a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax. In the instant case, the applicable rate of tax for cigarettes classifiable as CTH 2402 is 14% CGST and 14% SGST as per Sl.no 14 of Schedule IV of Notification No. 1/2017-C.T. (Rate) dated 28.06.2017 and Notification No. II (2)/CTR/532(d-4)/2017 vide G.O. (Ms) No. 62 dated 29.06.2017 as amended. Apart from this GST Compensation Cess is applicable at specified rates for different kinds of cigarette product as per Notification No.1/2017-Compensation Cess (Rate) DT 28.6.2017 as amended. Hence, in the case of the mixed supply of cigarettes by the restaurant, in person or room service, the applicable rate is the rate applicable to supply of cigarettes which 14% CGST and 14% SGST as per Sl.no 14 of Schedule IV of Notification No. 1/2017-C.T.(Rate) dated 28.06.2017 and Notification No. II(2)/CTR/532(d-4)/2017 vide G.O. (Ms) No. 62 dated 29.06.2017 as amended and the applicable GST Compensation Cess is applicable at specified rates for different kinds of cigarette product as per Notification No.1/2017-Compensation Cess (Rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 7(1) (c) of the GST Act. Schedule I of the Act. para 2 states Activities or Transactions to Be Treated As Supply Even If Made Without Consideration 2. Supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business:. As per the Explanation to Section 15 of the Act,- For the purposes of this Act, (a) persons shall be deemed to be "related persons" if- (iii) such persons are employer and employee; In the case at hand, the applicant provides food through a separate canteen to their employees, who are related persons as a part of the employment contract, i.e., in the course or furtherance of business. Therefore, as per Para 2 to Schedule I of the CGST/TNGST Act, supply of free food to the employees is a supply of service under the Act. Supply of food in a specified place, such as canteen as in the present case is a supply of service with SAC 996333 as given in the Annexure to Notification No. 11/2017-C.T.(Rate) dated 28.06.2017 which provides the Scheme of Classification of services 80 Group 99633 Food, edible preparations, alcoholic and non-alcoholic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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