Restaurant supplies and employee canteen meals: composite supply, mixed supply, GST exclusion for liquor, and related-person valuation rules apply.

Menu-listed soft beverages and aerated water supplied by a restaurant, including room service, are treated as a naturally bundled composite supply with restaurant service and taxed at the restaurant service rate. Cigarettes supplied for a single price are not naturally bundled with restaurant service; they constitute a mixed supply and attract the highest applicable GST rate together with compensation cess. Alcoholic liquor for human consumption remains outside GST and is not taxable under CGST or TNGST. Free meals provided to employees in a canteen are taxable supplies because employer and employee are related persons, and valuation is determined under the related-person valuation rule.

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Issues: (i) Whether soft beverages or aerated water supplied by the restaurant, independently or as room service, are a composite supply taxable at the restaurant service rate; (ii) Whether cigarettes supplied by the restaurant, independently or as room service, constitute a mixed supply taxable at the highest applicable rate together with compensation cess; (iii) Whether alcoholic liquor for human consumption supplied by the restaurant is taxable under GST; (iv) Whether free meals supplied to employees in the canteen are a supply under GST and liable to tax on valuation under the rules.

Issue (i): Whether soft beverages or aerated water supplied by the restaurant, independently or as room service, are a composite supply taxable at the restaurant service rate.

Analysis: The supply of soft beverages or aerated water through the restaurant involves both the goods supplied and the service of serving by the restaurant. The items are on the restaurant menu and are supplied in the ordinary course with the use of the restaurant's facilities and staff. Such supplies are treated as naturally bundled and supplied together in conjunction with each other. Under the scheme of classification, restaurant service covers food and beverages served by a restaurant, including room service, and the applicable entry in the rate notification prescribes the rate for such restaurant service.

Conclusion: Yes. The supply of soft beverages or aerated water is a composite supply of restaurant service and is taxable at 9% CGST and 9% SGST.

Issue (ii): Whether cigarettes supplied by the restaurant, independently or as room service, constitute a mixed supply taxable at the highest applicable rate together with compensation cess.

Analysis: Cigarettes supplied by the restaurant are not naturally bundled with restaurant service, since restaurant service ordinarily relates to food and beverages. When cigarettes are supplied for a single price, the transaction falls within the definition of mixed supply. For a mixed supply, tax liability is determined by the supply attracting the highest rate. Cigarettes are taxable at the applicable rate for the relevant tariff heading, and compensation cess also applies at the prescribed rates.

Conclusion: Yes. The supply of cigarettes is a mixed supply and is taxable at 14% CGST and 14% SGST, with applicable compensation cess.

Issue (iii): Whether alcoholic liquor for human consumption supplied by the restaurant is taxable under GST.

Analysis: Central GST does not levy tax on alcoholic liquor for human consumption. Such supply is treated as a non-taxable supply under the Act. Accordingly, a restaurant supply of alcoholic liquor for human consumption does not attract GST under the Central and State GST enactments.

Conclusion: No. Alcoholic liquor for human consumption supplied by the restaurant is not taxable under CGST or TNGST.

Issue (iv): Whether free meals supplied to employees in the canteen are a supply under GST and liable to tax on valuation under the rules.

Analysis: Food supplied to employees in the canteen is made without separate consideration but pursuant to the employment relationship. Employer and employee are related persons for GST purposes, and supplies between related persons in the course or furtherance of business are treated as supply even without consideration. Canteen services fall within the classification for canteen and similar establishments. The taxable value is to be determined in accordance with the valuation rule applicable to related-person supplies.

Conclusion: Yes. Free meals supplied to employees are a supply under GST and are taxable at 9% CGST and 9% SGST on the value determined under the valuation rule.

Final Conclusion: The ruling sustains GST liability on the restaurant supply of soft beverages and cigarettes and on employee canteen meals, while excluding alcoholic liquor for human consumption from GST.

Ratio Decidendi: Restaurant supplies of menu-listed beverages are composite restaurant services, cigarettes supplied for a single price constitute mixed supply, alcoholic liquor for human consumption is outside GST, and employer-to-employee canteen supplies made without consideration are taxable supplies by virtue of the related-person rule.

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