GST ON FOOD SUPPLIED IN TAKE AWAY COUNTERS

 

In a recent ruling, Hon'ble Advance Ruling Authority (AAR) in West Bengal has considered certain issues pertaining to restaurant services. 

The decision is summarized for your reference:

·       Supply of food and beverages from Take - Away Counters

In the case of supply of food and beverages from the take away counter, where the customers have no provision to consume the same in the premises, AAR has concluded that such supply of goods without any element of service shall be categorized as supply of goods.

The AAR also held that the applicant is eligible to avail input tax credit in respect of such supply of goods, subject to conditions laid down in CGST Act and rules made thereunder.

Supply of food and beverages in the restaurant

In the case of food or beverages served in the restaurant, AAR held that supply of food items and beverages by the applicant which offers the facility of eating in the same premises along with takeaway of the same shall be treated as restaurant services and shall attract tax at the rate of 5%.

AAR also held that the credit of input tax charged on goods and services used in supplying the service shall not be available.

With respect to the common input tax credit, it was held that the applicant shall follow the principle of apportionment of credit as laid down in sub-section (1) and (2) of section 17 of the GST Act read with rule 42 and 43 of the CGST/WBGST Rules, 2017 in respect of common input tax credit in the form of inputs, input services and capital goods.

Due to lack of clarity on the issue, many restaurants are incurring expenses in the form of rentals, royalty payments and other purchases on which GST is charged by the supplier. 

However, input tax credit is currently not available since restaurant services are taxed at the rate of 5% (without ITC).

On the basis of the advance ruling summarized above, where the restaurants have a dedicated take - away counter, GST can be charged by the restaurants and ITC can also be availed by the restaurants.

It is my view that by charging GST on food supplied through take - away counters, restaurants can avail input tax credit on the inputs and input services which are specifically used in the take-away counter and also ITC on common inputs and input services.  

(Please write to me at muthukumaran.adv@gmail.com for any queries in this regard)