2020 (10) TMI 853 - AAR - GST

Tax Rates Clarified: Soft Beverages 9% CGST/SGST, Tobacco 14% CGST/SGST. Liquor VAT, Free Employee Food Taxable.

The ruling clarified the tax rates for the supply of soft beverages and tobacco independently, determining soft beverages as a composite supply taxed at ... Classification of goods - rate of tax - supply of Soft Beverages (Aerated Water) and Tobacco (Smokes) when these items are supplied independently and not as composite supply in the restaurant - rate of GST if these items alone are supplied and not along with food as Composite supply to the guest - supply of liquor - exempt supply or not - proportionate reversal of ITC as per Rule 42 of CGST rules 2017 - reversal of ITC on free supply of food. What is the rate of tax applicable on the supply of Soft Beverages (Aerated Water) and Tobacco (Smokes) when these items are supplied independently and not as composite supply in the restaurant? In other words what is the rate of GST if these items alone are supplied and not along with food as Composite supply to the guest? - HELD THAT:- In the instant case, the hotel being a 5 star hotel has a declared tariff of above seven thousand and the restaurant in question has license to serve alcohol (relevant for the notification before amendment. From the above notification and amendments, it is seen that supply of soft beverages/aerated water, whether in person or room service, by the restaurant located in the premises of the hotel is taxable to GST at the rate of 18%. In the instant case, supply of tobacco products by the restaurant is not a composite supply but involves supply of two individual supplies of goods (tobacco products) and supply of services of serving by the restaurant. Such a supply is a mixed supply - In the instant case, the applicable rate of tax for cigarettes classifiable as CTH 2402 is 14% CGST and 14% SGST as per Sl.no 14 of Schedule IV of Notification No. 1/2017-C.T. (Rate) dated 28.06.2017 and Notification No. II (2)/CTR/532(d-4)/2017 vide G.O. (Ms) No. 62 dated 29.06.2017 as amended. Apart from this GST Compensation Cess is applicable at specified rates for different kinds of cigarette product as per Notification No.1/2017-Compensation Cess (Rate) DT 28.6.2017 as amended. Hence, in the case of the mixed supply of cigarettes by the restaurant, in person or room service, the applicable rate is the rate applicable to supply of cigarettes which 14% CGST and 14% SGST as per Sl.no 14 of Schedule IV of Notification No. 1/2017-C.T.(Rate) dated 28.06.2017 and Notification No. II(2)/CTR/532(d-4)/2017 vide G.O. (Ms) No. 62 dated 29.06.2017 as amended and the applicable GST Compensation Cess is applicable at specified rates for different kinds of cigarette product as per Notification No.1/2017-Compensation Cess (Rate) dt 28.6.2017 as amended. Whether supply of liquor is deemed to be the “exempt supply” under GST Act as per Section 2 (47) of CGST Act for the purpose of proportionate reversal of ITC as per Rule 42 of CGST rules 2017? - HELD THAT:- As per Section 9(1) of CGST/TNGST Act, the supply of alcoholic liquor for human consumption, is a non-taxable supply. Hence, supply of alcoholic liquor for human consumption by a restaurant will not be taxable under CGST/TNGST Act. It is obligatory on the part of employer to supply free food to the employees. Whether such free supply of food is liable to reverse ITC on inputs as per Rule 42 of CGST Rules 2017? - HELD THAT:- In the case at hand, the applicant provides food through a separate canteen to their employees, who are related persons as a part of the employment contract, i.e., in the course or furtherance of business. Therefore, as per Para 2 to Schedule I of the CGST/TNGST Act, supply of free food to the employees is a supply of service under the Act. Supply of food in a specified place, such as canteen as in the present case is a supply of service with SAC 996333 as given in the Annexure to Notification No. 11/2017-C.T.(Rate) dated 28.06.2017 which provides the Scheme of Classification of services - Therefore, supply of food in the specified canteen by the applicant to their employees without consideration is ‘supply’ under GST and taxable on the value of such supply as determined by Rule 28 of CGST Rules, 2017 - rate applicable is GST @ of 18%. Issues Involved:1. Rate of tax applicable on the supply of Soft Beverages (Aerated Water) and Tobacco (Smokes) when supplied independently.2. Taxability of supply of liquor under GST Act.3. Taxability of free food supplied to employees and the obligation to reverse ITC on inputs.Detailed Analysis:1. Rate of Tax on Soft Beverages and Tobacco:The applicant sought clarification on the GST rate for supplying soft beverages and tobacco independently, not as a composite supply with food. The ruling clarified that:- Soft Beverages/Aerated Water: When supplied independently in the restaurant or as room service, it is considered a composite supply of service. This is because the supply of beverages along with the restaurant services (use of facilities and staff) is naturally bundled. The applicable GST rate is 9% CGST and 9% SGST as per Notification No. 11/2017-C.T. (Rate) dated 28.06.2017 and its amendments.- Tobacco (Cigarettes): When supplied independently, it is not considered a composite supply but a mixed supply. The applicable GST rate for cigarettes is 14% CGST and 14% SGST, along with the applicable GST Compensation Cess as per Notification No. 1/2017-C.T. (Rate) dated 28.06.2017 and its amendments.2. Taxability of Liquor:The applicant sought clarification on whether the supply of liquor is taxable under the GST Act. The ruling clarified that:- Supply of Liquor: As per Section 9(1) of the CGST Act, the supply of alcoholic liquor for human consumption is a non-taxable supply under the GST regime. Therefore, the supply of liquor by the restaurant or as room service is not subject to GST but is liable for VAT.3. Free Food to Employees and ITC Reversal:The applicant sought clarification on the taxability of free food supplied to employees and the obligation to reverse ITC on inputs. The ruling clarified that:- Supply of Free Food to Employees: The provision of free food to employees in a canteen located within the hotel premises is considered a supply under GST. This is because the supply of goods or services between related persons (employer and employee) in the course or furtherance of business is deemed a supply even without consideration as per Schedule I of the CGST Act. The applicable GST rate is 9% CGST and 9% SGST on the value determined by Rule 28 of the CGST Rules, 2017.- ITC Reversal: The ruling did not explicitly address the obligation to reverse ITC on inputs related to the supply of free food to employees. However, it can be inferred that since the supply is taxable, the ITC on inputs used for providing such food may not need to be reversed.Ruling Summary:1. Soft Beverages/Aerated Water: Taxable at 9% CGST and 9% SGST.2. Cigarettes: Taxable at 14% CGST and 14% SGST, plus applicable GST Compensation Cess.3. Alcoholic Liquor: Not taxable under CGST/TNGST Act.4. Free Meals to Employees: Taxable at 9% CGST and 9% SGST on the value determined by Rule 28 of CGST Rules, 2017.