TaxTMI 
TaxTMI 
TaxTMI 
2026 (3) TMI 186
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....ake it clear that the provisions of the Central Goods and Services Tax Act, 2017 (the CGST Act, for short) and the West Bengal Goods and Services Tax Act, 2017 (the WBGST Act, for short) have the same provisions in like matter except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the WBGST Act. Further to the earlier, henceforth for the purposes of these proceedings, the expression "GST Act" would mean the CGST Act and the WBGST Act both. 1.2 The applicant runs a restaurant under the name and style of Pappu Chaiwala and is duly registered under the Goods and Services Tax law as a provider of restaurant services. In the course of operating the said restaurant, the applicant also proposes to serve hookah, whether herbal or tobacco based, to customers within the restaurant premises as part of the overall dining experience. In this background, the applicant has sought an advance ruling on whether the service of providing hookah at the restaurant, as part of the composite restaurant offering, would fall within the scope of clause 6(....
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....e setting in which the consumable item is supplied. 2.3 The Applicant submits that preparation of hookah flavours is not a mere trading activity. It involves a systematic and elaborate culinary-type process carried out within the restaurant kitchen. The preparation is comparable in complexity and method to preparation of food or beverages served in the restaurant. The herbal flavour mix consists of certified food-grade ingredients suitable for human consumption. These broadly include dried herbal leaves such as tea leaves, mint leaves or rose petals, or fruit pulp and fibres such as apple or pineapple. Vegetable glycerine of USP grade is used as a smoke-producing agent. Molasses or honey is added as a binding and sweetening agent. Water-soluble food-grade flavour concentrates are added to achieve desired taste profiles. These ingredients are consumable substances and many of them are used in ordinary cooking processes within the restaurant. The preparation requires the use of dedicated equipment such as stainless steel mixing bowls, measuring cups and spoons, wooden spatulas, airtight jars for storage and curing, food-safe gloves, and where required, dehydrator or oven for....
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....Court recognized that preparation and presentation of hookah carry all the overtones of service similar to serving food or alcohol. The West Bengal Authority for Advance Ruling in Summit Hotels & Resorts Private Limited held that beverages served and consumed within the restaurant premises using its infrastructure qualify as composite supply under Clause 6(b), the principal supply being restaurant service. Hookah served within the same infrastructure and ambience stands on identical footing. 2.7 The applicant believes that the expression "any other article for human consumption" used in Clause 6(b) is broad. It does not restrict itself to food having nutritional value. The only exclusion expressly carved out by the legislature is alcoholic liquor for human consumption, which is constitutionally excluded from GST under Article 366(12A). No other item is excluded. The applicant has referred to the judgment of the Hon'ble Calcutta High Court in the case of Sanjay Anjay Stores v. The Union of India & others and argues that though it was held in the said case that flavored "tobacco" hookah is not "food" as provided in FSSA, however, flavoured non-tobacco hookah would have to be....
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....nd are discharging GST at the concessional rate of 5% under Notification No. 46/2017-Central Tax (Rate) dated 14.11.2017 by treating the entire activity as restaurant service. The jurisdictional authority is of the opinion that such practice requires strict scrutiny as the principal supply in such establishments is not food or beverages but supply of variegated hookah flavours. 3.2 The Revenue has observed that hookah flavours, commonly packed in tins or jar containers, are classifiable under HSN Code 2403 11 10 and attract GST at 28% along with Compensation Cess at 72% at the time of supply by manufacturers or importers. These products generally contain flavoured tobacco (shisha/maassel), molasses, glycerine, honey, nicotine, flavouring substances and colours. The packages carry statutory health warnings and are treated as tobacco products under the applicable tariff classification. 3.3 It is the contention of the Revenue that the goods being supplied in such restaurants are in substance "assorted hookah flavours" falling under Heading 2403 11 10 and therefore taxable at 28% GST along with applicable Compensation Cess at 72%. The officer has further stated that the supply va....
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....cases is supply of hookah flavours classifiable under HSN 2403 11 10 attracting GST at 28% along with Compensation Cess at 72%, and not restaurant service taxable at 5%. 4. Observations & Findings of the Authority 4.1 We have gone through the records of the issue as well as submissions made by the authorized representative of the applicant during personal hearing. We have also considered the view given by the Revenue. 4.2 According to the facts narrated by the applicant, he runs a restaurant called 'Pappu Chaiwala' and is a registered service provider of restaurant services. He serves various foods and non-alcoholic drinks for human consumption to the guests from his restaurant which are otherwise cooked or prepared at the kitchen of the restaurant premises. The Applicant contemplates to serve non-tobacco / tobacco-based hookah to his guests. As per his statement, the applicant will not serve hookah on standalone basis. It will be served with some food or non-alcoholic drink or both. The foods and hookah are mentioned in the menu card of the restaurant as A La Carte menu. The applicant intends to serve hookah (herbal or tobacco-based) to its customers at the restaurant pre....
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..... The view of the applicant in this respect is that, had there been any intent of the law makers to exclude non-food-based products like hookah from the coverage of 'any other article for human consumption', there would have been an exception similar to the exception carved for alcoholic liquor for human consumption from the coverage of drinks. The applicant further holds that by usage of the terms 'food' or 'any other article for human consumption' separately, the law has in its own sense made it very clear that the latter covers something in addition to food or other than food and not similar to food. Anything similar to food shall also get covered within the term food itself and something other than food shall definitely encompass any article which can be consumed by humans like tobacco-based hookah (given that non-tobacco-based hookah gets covered within the scope of food itself). It is submitted that serving hookah in any restaurant is not a standalone service. There is no restaurant that serves only hookah. In that context, hookah is served in any restaurant/bar as an additional service. The service of hookah in restaurant is an integral part of the A La Carte, just ....
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.... in the manner of consumption. A cigarette requires no special apparatus-apart from a lighter or matchstick, and perhaps an ashtray. Smoking zones merely provide space; they involve no additional service. Hookah, on the other hand, cannot be consumed without specific apparatus: a pipe, hot coal, water, nicotine or herbal hookah mixtures, and flavourings, all of which must be arranged and provided by restaurant staff. The preparation and presentation of hookah involve the active involvement of service personnel, similar to the serving of food or alcohol. Thus, unlike cigarettes, consumption of Hookah inherently constitutes a service. Moreover, hookah smoking cannot be confined to a mere designated corner, nor can the apparatus be carried in one's pocket for personal use in a smoking area. Its preparation and consumption require elaborate arrangements and external assistance, underscoring its nature as a service. The applicant has referred to the judgment of the Hon'ble Calcutta High Court in the case of Sanjay Anjay Stores v. The Union of India & others and argues that though it was held in the said case that flavored "tobacco" hookah is not "food" as provided in FSSA, however, f....
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....all 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. First of all, Clause 6 of Schedule II has created a legal fiction where two kinds of composite supply enumerated in sub-clause (a) and (b) that are to be treated as supply of service even if goods are involved in the said supplies. Let us elaborate sub-clause (b) ibid since this is the central theme of our discussion. If we go through the provision carefully the following points become evident before us: 1. The supply referred to in the sub-clause is a supply of goods. 2. The goods are of the nature of food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption). 3. The said goods are supplied by way of or as part of any service or in any other manner. 4. The su....
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....n' with reference to the other two words encompassing the term. We can comprehend the legislative intention for inclusion of the term by adopting this approach only. According to the applicant, flavoured non-tobacco hookah should be treated as food and flavoured tobacco hookah exhibits the character of 'any other article for human consumption'. We are not inclined to accept this argument. The point to be noted is that it is not the question of tobacco or non-tobacco products. Whatever is used in the hookah for the purpose of smoking, it cannot be equated with taking any food or other article for human consumption. The phrases are used in such a way that they refer to something that is to be ingested and digested. Smoking, be it from tobacco or non-tobacco products, is in no way related to ingestion and digestion. In his additional submission the applicant has emphasised that flavours of hookah would not be served on a standalone basis. The customer has to place order for certain foods or drinks and only then order for hookah can be placed by the customer. So the proposition of the applicant is that service of hookah at the restaurant is incidental to service of food and drink....
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....ve them with cooked food as accompaniments and additives. For example, • Water: It includes packaged drinking water. • Condiments and sauces: Ketchup, mustard sauce, mayonnaise, hot sauce, soya sauce, steak sauce, and gravies. • Spices and seasonings: Salt, pepper, sugar/sweeteners, and chilli flakes provided in shakers or packets. • Table additions: Butter or margarine packets, jam, and honey. • Garnishes: Items like pickles, olives, or lemon/lime wedges that may be consumed with the meal. Having said so, it is clear that the supply of tobacco or non-tobacco products in a hookah in a restaurant is excluded from the scope of Clause 6 of Schedule II supra and hence serving of hookah for smoking cannot be considered as a composite supply of service. 4.9 Now we will go into the details of the nature of supply involving tobacco or non-tobacco based hookah for the purpose of smoking. As per the submission of the applicant, the following is the process for preparation of hookah, both tobacco and non-tobacco based. First of all, the ingredients for hookah are prepared as per the customer's choice and order. Thereaft....
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....to restaurant service. However, we reiterate our considered view that service of hookah in restaurant has some elements of service in it. In this context we are reproducing the definition of composite supply as provided in Section 2(30) of the CGST Act, 2017. "composite supply" means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply. Illustration.-Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply. In the case in our hand the supply has two taxable supplies. One is of goods in the form of tobacco or non-tobacco products provided to the customers for the purpose of smoking. The other is the supply of service in the form of preparation of hookah, serving the tobacco or non-tobacco in the hookah etc. They are naturally bundled in the sense tobacco or non-tobacco products cannot be smoked witho....
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..... These goods neither find specific entry in the list of exempted goods as per notification no. 2/2017-Central Tax (Rate) dated 28.06.2017, as amended by notification no. 10/2025 - Central Tax (Rate) dated 19.09.2025 nor find any specific entry in the schedules of taxable goods as per Notification No. 01/2017 - Central Tax (Rate) Dated 28.06.2017, as amended. In our considered view in case of non-tobacco (dried tea leaves, mint leaves or dried rose petals etc. as stated by the applicant) based hookah as such, the supply will also be treated as supply of goods and will be taxed @ 9% CGST + 9% SGST vide serial no. 639 of Schedule II of Notification No. 01/2017-Central Tax (Rate) Dated 28.06.2017, as amended. To remove any doubt let us clarify the whole issue placed before us as under: When a restaurant serves tobacco or non-tobacco based hookah in the restaurant along with food, there occurs two separate composite supplies. One is the supply of food which is covered by sub-clause (b) of Clause 6 of Schedule II supra and will be regarded as composite supply of service and will be taxed accordingly. The other composite supply is the supply of tobacco or non-tobacco products fo....