Supply of pure food from sweetshop with restaurant: GST ruling on composite supply & input tax credit

The court ruled that the supply of pure food items from a sweetshop with a restaurant constitutes a supply of services under the CGST/SGST Act, 2017. The restaurant services were deemed the principal supply, making it a composite supply. The applicable GST rate for the activity was determined to be 5%, with the condition of non-claiming input tax credit. The applicant was ineligible to claim input tax credit on goods and services used in the activity. All items, including takeaway items, were subject to a 5% GST rate without input tax credit.

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Issues Involved:
1. Determination of whether the supply of pure food items from a sweetshop running a restaurant constitutes a supply of goods or services.
2. Applicability of the nature and rate of tax on various food items supplied from a sweetshop with a restaurant and eligibility for input tax credit.

Issue 1: Supply of Goods or Services
The case involved an application seeking an advance ruling on whether the supply of pure food items from a sweetshop with a restaurant constitutes a supply of goods or services under the CGST/SGST Act, 2017. The applicant's business involved supplying goods and services and sought clarification on the nature of the transaction. The ruling considered the definitions of composite supply, goods, mixed supply, principal supply, and services under the Act to determine the classification of the supply. It was established that the services provided by the restaurant were the principal supply, bundling the preparation, sale, and serving of food, making it a composite supply. The ruling highlighted the distinction between composite and mixed supplies, emphasizing that in this case, the supply should be treated as a supply of service as per Schedule II of the Act.

Issue 2: Applicability of GST Rate
The ruling further addressed the issue of the applicable GST rate for the activity conducted by the applicant, which fell under "restaurant services" as per Heading 9963 of the GST rates on services. The relevant notification specified a GST rate of 2.5% for such services, subject to certain conditions. The ruling clarified that the GST rate for the activity would be 5%, with the condition that the input tax credit on goods and services used in supplying the service had not been claimed. Additionally, it was determined that the applicant was not eligible to claim input tax credit on the GST paid for the goods and services used in their activity. The order specified that all items, including takeaway items, would attract a GST rate of 5% subject to the condition of non-availment of input tax credit.

In conclusion, the judgment provided a detailed analysis of the issues raised by the applicant regarding the classification of the supply of goods or services from a sweetshop with a restaurant and the applicable GST rate. It clarified the nature of the supply as a service, outlined the relevant provisions of the Act, and determined the GST rate and eligibility for input tax credit for the activity conducted by the applicant.

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