2019 (11) TMI 131 - AAR - GST

Food Resale Not Restaurant Service: Kerala Ruling clarifies GST classifications and rates for clarity.

The Authority for Advance Ruling in Kerala determined that the resale of food and bakery products by the applicant does not fall under restaurant ... Restaurant services - resale of ready-to-eat food - place of business where food is prepared - classification under HSN - applicability of GST rates to pre-packed ready-to-eat foodRestaurant services - place of business where food is prepared - resale of ready-to-eat food - Resale of pre-packed ready-to-eat food and bakery products by the applicant does not constitute provision of restaurant services. - HELD THAT: - The Authority examined whether the applicant's activity of selling pre-packed food items and providing seating for consumption at the premises should be treated as restaurant services. A restaurant or eatery, as construed by the Authority, is a place of business where food is prepared on the premises and served based on orders received. The applicant purchases ready-to-eat products from other dealers, has no kitchen or cooking facility on the premises, and merely provides a facility for customers to consume the purchased items at the shop. On these facts, the activity lacks the essential characteristic of on-premises preparation and hence cannot be categorised as restaurant services.No; the applicant's resale of ready-to-eat/bakery products, with only a facility for consumption on the premises, is not restaurant service.Classification under HSN - applicability of GST rates to pre-packed ready-to-eat food - Classification of the various ready-to-eat food items under the specified HSN codes and the corresponding GST rates as set out in the order is accepted. - HELD THAT: - The Authority considered the applicant's proposed HSN classifications and applicable GST rates for a range of ready-to-eat products grouped in categories (sweets, namkeens, chips, pickles, jams, juices, puddings/payasam, prepared food combinations, and others). Having noted that the products are sold in ready-to-eat form and procured from other dealers, the Authority applied the relevant HSN descriptions and the rates specified in the Notifications cited in the order to each category and item. For items bearing the described characteristics (including distinctions for goods put up in unit containers bearing registered or actionable brand names), the Authority matched them to the HSN entries and notified the corresponding GST rates as listed in the order.The HSN classifications and GST rates specified in the order for the listed ready-to-eat food items are upheld.Final Conclusion: The Authority ruled that the applicant's business of reselling pre-packed ready-to-eat food and bakery items is not restaurant service and endorsed the HSN classifications and corresponding GST rates for the listed products as set out in the order. Issues:1. Whether resale of food & bakery products fall under restaurant services.2. Whether classification of HSN and Tax rates done by the applicant is correct or not.Issue 1:The applicant, engaged in reselling food products, sought an advance ruling to determine if the resale of food and bakery products falls under restaurant services. The applicant clarified that they do not cook food at their premises and only provide a facility for customers to consume the pre-packed food on-site. The Authority noted that a restaurant involves preparing and serving food to customers, whereas in this case, the applicant sells ready-to-eat items with an option for customers to eat on the premises. Consequently, the Authority ruled that the applicant does not qualify as a restaurant service provider.Issue 2:Regarding the classification of HSN and tax rates, the applicant sought clarification on various food items falling under nine categories. The Authority provided detailed classifications and applicable GST rates for each category of products sold by the applicant. The ruling covered items such as sweets, namkeens, chips, pickles, jams, juices, payasams, and other food preparations. The classifications were based on specific HSN codes and corresponding GST rates as per the relevant notifications. The Authority's ruling provided clarity on the correct classification and tax rates applicable to the different food products sold by the applicant.In conclusion, the Authority for Advance Ruling in Kerala addressed the issues raised by the applicant regarding the classification of food and bakery products and their tax implications. The ruling clarified that the applicant's resale of food items did not constitute restaurant services and provided detailed classifications and GST rates for various food categories. The comprehensive analysis by the Authority ensured clarity on the correct classification and taxation of the products sold by the applicant, thereby guiding them in compliance with the relevant regulations.