Does your Icecream parlour charge you right?

Getting lost in the myriad of notifications and circulars issued by CBIC is inevitable. Thus, in an attempt to avoid the complications arising from the plethora of notifications in respect to rates of GST to be charged by the food industry, an analysis of all of those has been discussed below for better understanding. The final conclusion that should be considered as on date in pursuance of the notifications issued previously has been elaborated below.

The rates to be applied pertaining to the food industry can be cited from Notification No.11/ 2017- Central Tax (Rate) which was later amended from time to time. Therein certain terms have been defined the understanding of which will be relevant for the purpose of decoding the nuances of the notification. Some of those terms are:

• Restaurant Service was defined as “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 home consumption or drink Is supplied.
• Outdoor catering 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, at Exhibition Halls, Events, Conferences, Marriage Halls and other outdoor or indoor functions that are event based and occasional in nature.
• Hotel accommodation means supply, by way of accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes including the supply of time share usage rights by way of accommodation.
• 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.

S. No. 6 given above is the residual category. The situations which are in contradiction to those specified in S. No. 1 to S. No. 5 are covered by it. On a plain reading, one would come to the conclusion that wherever the Specified Premises comes into the picture, be it the location of service or the supplier of service, higher GST rate of 18% gets attracted. Further, when food is being supplied as one of the many services that are bundled together and are termed as accommodation service by a Hotel having value of supply of each unit equal to or less than Rs.7,500, then GST Rate will be 12%. However, if restaurant service is being provided in a hotel, not as a part of accommodation service, and the value of supply of each unit is less than or equal to Rs.7,500 then the GST rate attracted will be 5%.

Further, on perusal of the definition of Restaurant Services, it is evident that when food items are supplied as takeaways and the business premise doesn’t provide any facility to the customers to consume the same at the premise itself, then such supply is treated as supply of goods i.e. such a supply will not get covered within the ambit of restaurant services.

Hence, if you were visiting an ice-cream parlour on the weekend with no sitting facility and you get to have a bill showing CGST/ SGST rate equal to 9% each then the same should not be seen as something charged out of the blue. Rather, it will be deemed to be in order since what you are receiving is not a restaurant service. Instead, it will be considered as the purchase of goods. Thus, the beneficial rate of 5% will not be enjoyed. Such transactions are not governed by the aforementioned notification.

Hence, it can be safely concluded that the GST rates connected with the service of supply of food or any other article for human consumption or any drink are:

• 12%
• 5%
• 18%

The rate that should be attracted in each case is dependent on the facts and circumstances that vary. For further clarification, reference can be made to the Advance Ruling pronounced in the case of M/s Sri Venkateshwara Agencies dated 2.03.2020.  The AAR cited the aforementioned notification and drew the following conclusions:

• If icecream products are sold by a supplier to pushcart vendors, who deal in these products, or
• If party orders are met i.e. sale of bulk ice creams to caterers as takeaway

Then the supplier will not have to consider the N/No. 11/ 2017 since it is not providing restaurant/ outdoor catering/ hotel accommodation services. Hence, it is upto the supplier to be ethical enough to charge what is right and upto the recipient to be wise enough to know what he should be paying, considering the same is justified in the light of CBIC Notifications.