SUPPLY OF HOOKAH FOR SMOKING IN FOOD COURTS.

[Sadanand Bulbule]

Dear Sir/s

Following is the query.

Here in Bengaluru in one of the food courts,in addition to the supply of food & drinks, there is also the facility of supply of " assorted hookah flavours" to the desired smokers for smoking in the said premises. The food court is charging 5% GST on the supply value of food& drinks without availing ITC.However the food court is purchasing " assorted hookah flaours " the classified tobacco product from the local vendor who is charging 28% GST and 72% Cess as notified and classified as Tobacco products under HSN. 2403 11 10. But while re-supplying assorted hookah flavaours, the food court is charging only 5% GST separately on the value of hookah and for the supply of food& drinks and hookah flavours.

My understanding is "hookah flavours" being specific tobacco product unconnected with food& drinks does come under classification of supply of food & drinks eligible for 5% GST with or without ITC. Mere change in the location of supply of hookah as such would not alter the rate of GST with the nature of hookah flavours being intact till it is supplied to the desired smoker. The value of addition is very very huge in respect of re-supply of hookah flavours in the hands of the food court. Therefore it may be an attempt to escape the higher rate of GST at 28% with 72% Cess on the outward supply value of such hookah flavours.

Kindly enlighten whether this kind of practice of charging reduced rate of GST at 5% on the outward supply hookah flavours by the food court to end smokers for smoking in its business premises is right? And under what provisions?

Profound regards.

AI Summary

Composite supply classification determines GST rate for hookah served in eateries, affecting tax rate, cess and ITC consequences.
Classification of hookah supply as either a composite supply (accessory to restaurant service) or a separate sale of tobacco goods controls the applicable tax rate, cess treatment and ITC consequences. If accessory to on site restaurant service, the principal supply rate applies and input tax credit is not claimed; if supplied as goods-particularly branded or tobacco containing products-higher tax and compensation cess apply. Factual elements such as mode of supply, ownership transfer, composition testing and invoicing determine the correct tax treatment.