Interpretation of Entry 57(i) KGST Act: Collective Turnover of Hotels & Restaurants for Tax Liability Determination

The court clarified that liability under entry 57(i) of the KGST Act is triggered when the turnover of cooked food and beverages alone reaches Rs. 20 lakhs, excluding turnover of other goods. The turnover of all hotels and restaurants operated by the petitioner should be collectively considered for tax liability determination. The judgment overruled the previous decision and affirmed the Tribunal's decision, emphasizing the correct interpretation of entry 57(i) for sales tax assessments in the context of hotels and restaurants.

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Issues:
Interpretation of entry 57 of the First Schedule to the KGST Act for sales tax assessments of a company running hotels and restaurants.

Analysis:
The case involves the interpretation of entry 57 of the First Schedule to the KGST Act for sales tax assessments of a company operating hotels and restaurants. The petitioner, a government undertaking, claimed exemption from sales tax on cooked food and beverages in certain restaurants with turnover below Rs. 20 lakhs. However, the Deputy Commissioner set aside the exemption orders and directed assessment of the entire turnover of cooked food. The Tribunal upheld the levy based on a Division Bench judgment. The Division Bench referred the matter for decision, questioning the correctness of the previous judgment.

The key issue raised was whether the turnover of cooked food and beverages alone or the total turnover of the hotel should be considered for liability under entry 57(i). The court clarified that liability is triggered when the turnover of cooked food and beverages reaches Rs. 20 lakhs, excluding turnover of other goods. The Special Government Pleader argued that the turnover referred to in entry 57(i) encompasses the total turnover of the hotel, including all branches, based on a Supreme Court decision reversing a Madras High Court judgment.

Another crucial question was whether each hotel or restaurant should be treated as an independent unit for tax liability determination. The court observed that the Act allows a dealer to have a single registration with branch registrations for each business place. The definition of "turnover" indicates it includes the aggregate amount from all business locations. Therefore, the turnover of all hotels and restaurants operated by the petitioner should be considered collectively to ascertain liability under entry 57(i).

The court emphasized that the term "which" in entry 57(i) refers to the hotel or restaurant itself, not the cooked food. Consequently, the turnover mentioned in the entry pertains to the dealer running all branches in the State. The judgment overruled the previous decision that excluded turnover of other goods in a hotel for tax liability determination, stating that if the total sales of all goods exceed Rs. 20 lakhs, tax is applicable on cooked food and beverages. The court dismissed the revision cases, affirming the Tribunal's decision and clarifying the correct interpretation of entry 57(i) for sales tax assessments in the context of hotels and restaurants.

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