Tax Categorization: Goods vs. Services under GST

The Authority categorized sales from the sweetmeats and bakery shop as supply of goods, allowing the applicant to avail input tax credit. Food items and beverages sold from the restaurant were classified as restaurant services attracting a 5% GST rate without input tax credit. Catering services to an educational institution were deemed exempt from tax, while services to auditors, guests, and parents on program days were considered 'outdoor catering' subject to a 5% tax rate without input tax credit. The applicant was directed to adhere to apportionment principles for common input tax credit as per relevant GST rules.

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Issues Involved:
1. Categorization of sales from the sweetmeats and bakery shop as supply of goods.
2. Eligibility for input tax credit on the sale of items from the sweetmeats and bakery shop.
3. Classification of supply of food items and beverages from the restaurant facility as restaurant services attracting a 5% GST rate.
4. Eligibility for input tax credit on restaurant services.
5. Requirement for reversal of input tax credit in terms of Rule 42 and 43 of the CGST Rules 2017 for common input tax credit.
6. Qualification of catering services provided to an educational institution as an exempt supply.

Detailed Analysis:

1. Categorization of Sales from Sweetmeats and Bakery Shop as Supply of Goods:
The applicant operates a business with two distinct sections: a sweet parlour for selling sweetmeats, namkeens, and bakery items as takeaways, and a restaurant for preparing and serving fast food snacks and beverages. The applicant argues that the sales from the sweet parlour should be considered as supply of goods since there is no service element involved. The Authority agrees, stating that when goods are supplied from the sweetmeats parlour without any service element, it cannot be considered a composite supply. Such supplies are treated as supply of goods and attract tax accordingly.

2. Eligibility for Input Tax Credit on Sales from Sweetmeats and Bakery Shop:
The Authority rules that the applicant is eligible to avail input tax credit for supplies from the sweetmeats counter, provided the conditions laid down in Chapter V of the GST Act and rules are met.

3. Classification of Supply of Food Items and Beverages from Restaurant Facility as Restaurant Services:
The applicant contends that serving fast food snacks and beverages, whether consumed on the premises or taken away, should be classified as restaurant services. The Authority concurs, stating that such supplies qualify as composite supplies with the principal supply being restaurant service. Tax on such supplies is levied according to entry serial number 7 of Notification No. 11/2017- Central Tax (Rate), attracting a 5% GST rate, provided input tax credit on goods and services used in supplying the service has not been availed.

4. Eligibility for Input Tax Credit on Restaurant Services:
The applicant agrees to the condition that input tax credit is not available for restaurant services as per the relevant notification. The Authority confirms this, aligning with the applicant's acceptance of the non-availability of input tax credit for restaurant services.

5. Requirement for Reversal of Input Tax Credit for Common Inputs:
The applicant acknowledges the necessity to reverse input tax credit where common inputs, input services, and capital goods are used for both premises. The Authority directs the applicant to follow the principles of apportionment of credit as laid down in Section 17(1) and (2) of the GST Act, read with Rule 42 and 43 of the CGST/WBGST Rules, 2017.

6. Qualification of Catering Services to Educational Institution as Exempt Supply:
The applicant provides catering services to an educational institution offering education up to secondary school. The Authority refers to Notification No. 12/2017- Central Tax (Rate) and Circular No. 85/04/2019-GST, concluding that catering services to such an institution are exempt from GST. However, catering services provided to auditors, guests, and parents on program days are classified as 'outdoor catering' and attract a 5% tax rate under entry serial number 7(iv) of Notification No. 11/2017- Central Tax (Rate), without the benefit of input tax credit.

Ruling:
1. Sales from the sweetmeats counter are categorized as supply of goods, and the applicant is eligible for input tax credit subject to conditions.
2. Supply of food items and beverages from the restaurant is treated as restaurant services, attracting a 5% GST rate without input tax credit.
3. Catering services to the educational institution are exempt from tax.
4. Catering services to auditors, guests, and parents on program days are treated as 'outdoor catering' and attract a 5% tax rate without input tax credit.
5. The applicant must follow the apportionment principles for common input tax credit as per Section 17 and Rules 42 and 43 of the CGST/WBGST Rules, 2017.

This ruling is valid subject to the provisions under Section 103 until declared void under Section 104(1) of the GST Act.

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