Composition scheme

[VIGNESH]

Sir.can Bakery and Sweet Stall opt for composition scheme @ 1% tax if turnover is below 1.5 crores?

[VIGNESH]

sir.in the above query the bakery is operating as trader for all products served except Tea & coffee

[Shilpi Jain]

Is there a place in the premises to sit and have food?

If it's in the nature of restaurant service then 1% will not be applicable 

 5% would be the tax. 

[Shilpi Jain]

How to determine whether it is restaurant service or supply of food? 

Additional facts and details would be required

[KASTURI SETHI]

Not eligible for composition scheme. Both items fall under the category of food. See the legal meaning  of food under various Acts. Supply of food attracts GST @ 5% without ITC. 

[KASTURI SETHI]

In order to arrive at the  correct and concrete decision, see the definition of 'food' under Prevention of Food Adulteration Act, 1954 (Section 2 (v) and Essential Commodities Act , 1955  {Section 2 (a)(v)} 

[Padmanathan KV]

From the facts in query as well as post 1, it appears that the said bakery and sweet stall is serving tea/ coffee.

Pls refer to following proviso to section 10:

Provided further that a person who opts to pay tax under clause (a) or clause (b) or clause (c) may supply services (other than those referred to in clause (b) of paragraph 6 of Schedule II), of value not exceeding ten per cent. of turnover in a State or Union territory in the preceding financial year or five lakh rupees, whichever is higher. 

Clause (b) of Para 6 of Schedule II reads as below:

6. Composite supply

The following composite supplies shall be treated as a supply of services, namely:-

(a) works contract as defined in clause (119) of section 2; and

(b) supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration.

In my opinion, serving tea/ coffee gets covered under the above entry and hence, as per the proviso to section 10 the bakery will not be eligible under sub-section (1).

[Ravikumar Doddi]

Madam Shilpiji

Mostly in bakeries there would not be any service, just they will take the food items across the counter which are readily available and cooked food as per ordered and there will be Tables to sit and eat the Food.

[KASTURI SETHI]

Restaurant service has nothing to do here despite arrangement of sitting and eating. in bakery shop. 

Sh.Padmanathan Kollegode has well explained. There is no room for doubt.

[Shilpi Jain]

Please have a look at decisions of the HC and SC in the context of supply of food.

GST has totally misconceived the concept of supply of food as service/goods. GST only considers preparation of food as service.

In fact only if there are other facilities like seating, serving, ambience, cutlery, etc. it will be regarded as supply of service.

In my view food delivery is supply of goods. This is a sleeping issue now and may be woken up in due course of time.

AI Summary

Composition scheme eligibility for food suppliers denied when supply constitutes composite food service under composite supply rules. Eligibility for the composition scheme turns on whether supplies of food and beverages are supplies of goods or services forming a composite supply. If serving tea or coffee is made 'by way of or as part of any service' for consideration, that activity is treated as a service under the composite supply rule and can render the trader ineligible for composition treatment, affecting applicable GST rate and input tax credit treatment.