GST on food in Bakery / in Restro / in Hotel

The sight that first comes to the mind while thinking of restaurant service is that of mouth-watering meals, leisure & comfort. But understanding the taxability of the same has been a tedious & topsy-turvy task to accomplish.

  • Restaurant

Arestaurant is a place of business where food is prepared in the premises and served based on the orders received from the customer. Further, restaurant service is not limited to service from the restaurant but covers all the services supplied from the restaurant, eating joint, mess, canteen i.e. all services are included whether for consumption on or away from the restaurant. Hence, even if the food is supplied on take-away basis it would be classified as restaurant service.

Supply of packaged food being namkeens, bakery products, cold drinks,sweets,and other edible items are supplied to customers at a place attached to the restaurant, then such supplies would fall within the ambit of restaurant service and will be taxable @ 5% IGST rate without ITC.

Taxability

Declared tariff> ₹ 7,500 = @ 5 % IGST rate without ITC(Premises of hotels, inns, guest houses, clubs, campsites etc.)

Declared tariff< ₹ 7,500 = @ 18 % IGST rate without ITC(Premises of hotels, inns, guest houses, clubs, campsites etc.)

  • Bakery

A shop in which bread (& often other baked goods such as cakes) is baked and/or sold.

Taxability

Currently, branded snacks are taxed at 12% & pastries / cakes are taxed at 18%.

  • Restaurant & Bakery are same?

Restaurant is a place of business where food is prepared in the premises & served on the order received from the customer. Whereas bakery is a place where ready to eat items are sold and mere facility is provided to have it from the shop

However, if the supply of packaged food as mentioned above are supplied from a separate place other than a restaurant or a separate specified area of a restaurant, then such supply would not fall within the ambit of restaurant service. As the same being not supplied from the restaurant, hence no service could be deemed to be provided to treat the supply as a composite supply. The person effecting suchsupplies would also be eligible to claim the credit of input tax.

  • Desk of AAR
  • In Advance Ruling of Kundan Misthan Bhandar it was held that sale of sweets, namkeens, cold drinks, and other edible items from sweetshop counter will be treated as supply of goods with applicable GST rates of the items being sold and ITC will be allowed on such supply. Further, held that sale of sweets, namkeens, cold drinks, and other edible items through restaurant will be treated as ‘composite supply’ with restaurant service being the principal service. Existing GST rates on restaurant service will also be applicable to all such sales and no ITC will be allowed.
  • In Advance Ruling of M/s Square one Homemade Treats it was held that resale of food & bakery products does not fall under restaurant services.

Conclusion

Based on AAR & other discussion mentioned supra, if packaged food being namkeen, sweet, bakery product is being sold by the restaurant the same will be taxable @ 5% without ITC. But if the same are being supplied from a place other than a restaurant or from separate specified area of the restaurant then such supplies would attract their specific applicable GST rates (e.g. Namkeens – 12%, cakes – 18% etc) & ITC will be allowed on such supplies.

This content is meant for information only and should not be considered as an advice or legal  opinion, or otherwise. AKGVG & Associates does not intend to advertise its services through this.

Posted by:

CA Tarun Kapoor

AKGVG & Associates

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