2018 (9) TMI 1644 - AAR - GST

Food court items taxable at 5% GST under SAC 9963, ITC allowed for movie operations but denied for building maintenance under Section 17(5)

AAR MP ruled that food, soft drinks, and snacks sold in applicant's snack bar/food court are chargeable to GST at 5% under SAC 9963, meeting conditions of ... GST rate on supply of food by restaurants/eating joints - Input Tax Credit - restriction on ITC for goods or services received for construction/renovation of immovable property - availability of ITC on works contract services - apportionment of ITC where inputs are used partly for exempt suppliesGST rate on supply of food by restaurants/eating joints - Items supplied in the Snack Bar and Food Court are chargeable to GST at 5% under Notification No.11/2017 as amended by Notification No.46/2017, classifiable under SAC 9963, subject to notified conditions. - HELD THAT: - The supply of food, soft drinks and snacks by the Applicant at its Snack Bar and Food Court falls within the entry for restaurant/eating joint services (SAC 9963) covered by the notifications cited. The Applicant does not provide lodging/accommodation and has not taken input tax credit on inputs used for these supplies, so the conditions of the notification are satisfied. The supply cannot be characterized as outdoor catering for Service Tax purposes. Accordingly the applicable rate is CGST 2.5% and SGST 2.5% (total 5%), subject to fulfillment of the notification's conditions. [Paras 7, 8]GST @5% (2.5% CGST + 2.5% SGST) applies to supplies at the Snack Bar and Food Court under the stated notifications, subject to conditions.Input Tax Credit - apportionment of ITC where inputs are used partly for exempt supplies - ITC on Movie Distributor revenue share, projector rental and advertising is admissible in full; ITC on security and housekeeping is admissible only to the extent apportioned to taxable supplies and must be reversed for the portion attributable to exempt supplies. - HELD THAT: - The services of movie distributor revenue sharing, projector rental and advertising are input services attributable to the Applicant's taxable output activities and therefore qualify for ITC under Section 16, subject to general conditions. Security and housekeeping services are used across divisions (including areas supplying exempt services), so ITC on those services must be apportioned; any share attributable to exempt outward supplies must be reversed in accordance with Section 17(1). The ruling applies the principle that ITC is admissible when inputs are used in furtherance of taxable business but must be adjusted where used for exempt supplies. [Paras 7, 8]ITC allowed in full for distributor, projector rental and advertising; security and housekeeping ITC to be apportioned and reversed for part used for exempt supplies.Input Tax Credit - restriction on ITC for goods or services received for construction/renovation of immovable property - ITC on goods purchased for maintenance/renovation of the Mall building (vitrified tiles, marble, granite, ACP sheets, steel, cement, paints, sanitary items etc.) is not admissible. - HELD THAT: - Clause (d) of Section 17(5) excludes ITC in respect of goods or services received for construction of an immovable property on one's own account, and the Explanation defines 'construction' to include renovation, repairs or alterations to the extent of capitalization. The materials in question are used for repair/renovation/maintenance of the Mall, an immovable property, and therefore fall squarely within the exclusion. The Authority noted that the Applicant's bare assertion that expenditure is not capitalized is insufficient; eligibility for ITC does not depend on accounting treatment but on the statutory test. Consequently ITC on such goods is disallowed. [Paras 7, 8]ITC on materials used for maintenance/renovation of the Mall building is not admissible under clause (d) of Section 17(5).Input Tax Credit - availability of ITC on works contract services - restriction on ITC for goods or services received for construction/renovation of immovable property - ITC on works contract services obtained for maintenance/repair/renovation of the Mall building is not available to the Applicant. - HELD THAT: - Clause (c) of Section 17(5) prohibits ITC on works contract services supplied for construction of an immovable property, except where such works contract service is an input service for further supply of works contract service. The Applicant's works contract services are for civil repair/renovation/maintenance of the Mall and are fully consumed by the Applicant; they are not used as inputs for supplying further works contract services. Therefore the statutory exception does not apply and ITC is barred. [Paras 7, 8]ITC on works contract services for maintenance/repair/renovation of the Mall building is not available under clause (c) of Section 17(5).Final Conclusion: The Authority rules that (i) food and beverages sold at the Applicant's Snack Bar and Food Court attract GST at 5% under the relevant notifications (subject to conditions); (ii) ITC is allowable in full for movie distributor share, projector rental and advertising, while security and housekeeping ITC must be apportioned and reversed for exempt use; (iii) ITC on goods used for maintenance/renovation of the immovable Mall building is disallowed; and (iv) ITC on works contract services for such maintenance/renovation is disallowed. Issues Involved:1. GST rate on food, soft drinks, and snacks sold in the Snack Bar & Food Court.2. ITC of GST paid on Movie Distributor revenue share bill, Projector Rental Bill, Advertising Bill, Security Agency Bill, and Housekeeping Bill.3. ITC on GST paid on goods purchased for maintenance such as Vitrified Tiles, Marble, Granite, ACP Sheets, Steel Plates, TMT TOR, Bricks, Cement, Paint, Chemicals, Sanitary items.4. ITC of GST paid on Works Contract service received from registered & unregistered contractors for maintenance contract of building.Detailed Analysis:Issue 1: GST Rate on Food, Soft Drinks, and Snacks Sold in the Snack Bar & Food CourtThe applicant sought clarification on whether GST at 5% can be charged on food, soft drinks, and snacks sold in the Snack Bar & Food Court under Notification No. 46/2017. The Authority for Advance Ruling (AAR) found that the services provided by the applicant fall under the category defined in Notification No. 11/2017-Central Tax (Rate) as amended by Notification No. 46/2017-Central Tax (Rate). The relevant entry specifies that the supply of food and drinks by a restaurant, eating joint, or canteen, not providing lodging services, is chargeable to GST at 5% (2.5% CGST + 2.5% SGST), provided no input tax credit (ITC) is claimed on goods and services used in supplying the service. The AAR concluded that the applicant’s Snack Bar services are classifiable under SAC 9963 and chargeable to GST at 5%, subject to the conditions laid down in the notification.Issue 2: ITC on GST Paid on Various BillsThe applicant sought to claim ITC on GST paid on Movie Distributor revenue share bill, Projector Rental Bill, Advertising Bill, Security Agency Bill, and Housekeeping Bill. The AAR held that these services are input services for the applicant's business operations and are attributable to providing declared output services. Therefore, ITC on these services is admissible under Section 16 of the GST Act, 2017. However, for services like Security and Housekeeping, which are also used for exempted supplies (e.g., Snack Bar), ITC must be apportioned, and the portion attributable to exempted supplies must be reversed as per Section 17(1) of the GST Act, 2017.Issue 3: ITC on GST Paid on Goods for MaintenanceThe applicant sought to claim ITC on GST paid on goods purchased for maintenance, such as Vitrified Tiles, Marble, Granite, ACP Sheets, Steel Plates, TMT TOR, Bricks, Cement, Paint, Chemicals, and Sanitary items. The AAR referred to Section 17(5)(d) of the GST Act, 2017, which prohibits ITC on goods or services used for the construction of an immovable property, including maintenance and renovation. The AAR concluded that since these goods are used for maintaining the Mall building, an immovable property, ITC on such goods is not admissible.Issue 4: ITC on GST Paid on Works Contract ServicesThe applicant sought to claim ITC on GST paid on Works Contract services received from contractors for building maintenance. The AAR referred to Section 17(5)(c) of the GST Act, 2017, which disallows ITC on works contract services when supplied for the construction of an immovable property, except where it is an input service for further supply of works contract service. The AAR concluded that since the applicant uses these services for maintaining the Mall building and not for providing further works contract services, ITC on such services is not admissible.Ruling:1. GST Rate on Food, Soft Drinks, and Snacks: The items supplied in the Snack Bar and Food Court are chargeable to GST at 5% (2.5% CGST + 2.5% SGST) under Notification No. 11/2017-Central Tax (Rate) as amended by Notification No. 46/2017-Central Tax (Rate), subject to conditions laid down at Serial Number 7 of the parent Notification classifiable under SAC 9963.2. ITC on Various Bills: ITC on Movie Distributor Revenue Sharing Bill, Projector Rental Bill, and Advertising Bill is fully admissible. For Security Agency Bill and Housekeeping Bill, ITC is restricted to the portion used for taxable output services, and any ITC attributable to exempted output services must be reversed as per Section 17(1) of the GST Act, 2017.3. ITC on Goods for Maintenance: ITC on GST paid on goods purchased for maintenance, such as Vitrified Tiles, Marble, Granite, ACP Sheets, Steel Plates, TMT TOR, Bricks, Cement, Paint, Chemicals, and Sanitary items, is not admissible under Section 17(5)(d) of the GST Act, 2017.4. ITC on Works Contract Services: ITC on GST paid on Works Contract services received for building maintenance is not admissible under Section 17(5)(c) of the GST Act, 2017.