ARA, Rajasthan has pronounced Ruling on 25.1.2022, in the case of Shrivika Foodcraft, Jaipur (2022) 37 J.K.Jain’s GST & VR 124, that,
“Supply of food and beverages by the eating joints by way of Dine In, Take Away, Delivery, is classifiable under HSN code 9963 and will be treated as Supply of ‘Restaurant Service’ as per entry 6(b) of Sch.II, GST Act, 2017, liable to 5% GST (without ITC).”
1.Background.─The applicant is looking forward to setup restaurants in form of central kitchen/eating joints for sale of following food items alongwith various modes of services thereof to their customer for a consideration:
| S.No. | ltem Name |
| 1. | Sandwiches/Burgers/Wraps Continental Food |
| 2. | Salads/Indian Food |
| 3. | Milk Based Shakes/Beverages |
| 4. | Non Milk Based Beverages |
| 5. | Brownie |
| 6. | Cakes Pastries |
| 9. | Bread/Pizza base/Bun/Pav |
| 7. | Cookies/Rusk |
| 8. | Foxnut/Nachos |
As per facts laid down in their written submission, the applicant will have a dedicated central kitchen for the preparation of food items and there will be various eating joints under the brand name of applicant from where the food preparations will be offered to the customers. The consumers will only have access to such eating joints. A substantial part of cooking process of majority food items will be carried out at the central kitchen and the eating joints will receive the pre-cooked or semi-cooked preparations from the kitchen in different forms, containers or packaging having a shelf life as applicable for the food item. The preparations may be sent to the outlets in packed form to be offered to the customers as such or to be further processed for offering the food items or dishes at the choice and desire of consumers.
2. Findings by ARA.─In view of above facts, ARA are of the view that activity of sale of aforementioned food items along with services thereof to be performed by the applicant in respect of central kitchen/eating joints by way of Dine In, Take away & delivery is covered under ‘supply’ as per S.7 CGST Act, 2017 and liable to tax as per S.9, CGST Act, 2017. As far as nature of supply in the present case is concerned, we can visit the clause (b) of entry 6 of the Sch.II to S.7, CGST Act, 2017 which is as under:–
The following composite supplies shall be treated as a supply of services namely:–
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.
“As per explanatory notes to the scheme of classification under heading 9963: Accommodation, Food and Beverage service, we find that activity to be performed by the applicant will be classified under heading 996331 “services provided by Restaurants, Cafes, and similar eating facilities including take away services, Room services, and door delivery of food”.
Further, the GST rates on services have been notified by the Govt. vide Notfn No.11/2017-CT(R) dated 28.6.2017 as amended vide Notification No.- 20/2019-CT (R) Dated: 30 Sep 2019. and the relevant extract of the said notfn (as amended) for the present issue is reproduced as under:
| S.No. | Heading | Description of Service | Rate |
| 7 | Heading 9963 (Accommo- dation, food and beverage services) | (i) Supply of hotel accommodation having value of supply of a unit of accommodation above one thousand rupees but less than or equal to seven thousand five hundred rupees per unit per day or equivalent. | 6 |
| (ii) Supply of restaurant service other than at specified premises
Condition.─ Provided that credit of input tax charged on goods and services used in supplying the service has not been taken [Please refer to Explanation No. (iv)] |
2.5 | ||
| (iv) Supply of ‘outdoor catering’, at premises other than specified premises provided by any person other than–
(a) suppliers providing ‘hotel accommodation’ at ‘specified premises’, or (b) suppliers located in specified premises’. Condition.─ Provided that credit of input tax charged on goods and services used in supplying the service has not been taken [Please refer to Explanation(iv)] |
2.5 | ||
| (v) Composite supply of ‘outdoor catering’ together with renting of premises (including hotel, convention center, club, pandal, shamiana or any other place, specially arranged for organising a function) at premises other than specified provided by any person other premises than–
(a) suppliers providing ‘hotel accommodation’ at “specified premises”, or (b) suppliers located in ‘specified premises’ Condition.─ Provided that credit of input tax charged on goods and services used in supplying the service has not been taken [Please refer to Explanation (iv)] |
2.5 | ||
| (vi) Accommodation, food and beverage services other than (i) to (v) above Explanation.–
a) For the removal of doubt, it is hereby clarified that, supplies covered by items (ii), (iii), (iv) and (v) in column (3) shall attract central tax prescribed against them in column 14 subject to conditions specified against them in column (5), which is a mandatory rate and shall not be levied at the rate as specified under this entry. (b) This entry covers supply of restaurant service at ‘specified premises’ (c) This entry covers supply of hotel accommodation having value of supply of a unit of accommodation above Rs.7500/- per unit per day or equivalent. (d) This entry covers supply of ‘outdoor catering’, provided by suppliers providing ‘hotel accommodation’ at ‘specified premises’, or suppliers located in ‘specified premises’ (e) This entry covers composite supply of ‘outdoor catering’ together with renting of premises (including hotel convention center, club pandal, shamiana or any other place, specially arranged for function) suppliers organizing provided by providing accommodation at specified premises, or suppliers located in ‘specified premises’ |
9 |
As evident from the tariff above, there is a specific entry for Supply of ‘restaurant service’ other than at specified premises in Entry 7(ii) and for the purpose of the said notfn, ‘restaurant service’ has been defined in the notfn itself as under:
(xxxii) “Restaurant service” means supply, by way of or as part of any service, of goods, being food or any other article for human consumption or any drink, provided by a restaurant, eating joint including mess, canteen whether for consumption on or away from the premises where such food or any other article for human consumption or drink is supplied.
The only exclusion from the entry 7(ii) is supply of such service at specified premises. In the Notfn No.11/2017-CT(R) dated 28.6.2017 at explanation No.(xxxvi) the “specified premises” defined as under:
“specified premises” means premises providing “hotel accommodation” services having declared tariff of any unit of accommodation above Rs.7500/- per unit per day or equivalent.
In present facts since the eating joints of the appellant are not intended to be located in any premises having hotel accommodation services. Hence the case of the applicant is not covered in exclusion as premises will be as standalone restaurant(s).
Further, vide Circular No.164/20/2021-GST dated 6.10.2021 in respect of Clarifications regarding ‘Services by cloud Kitchens/central kitchens’. The clarification in the Circular is reproduced as under for reference:
“Services by cloud kitchens/central kitchens:
a) Representations have been received requesting for clarification regarding the classification and rate of GST on services rendered by Cloud kitchen or Central Kitchen.
b) The word “restaurant service” is defined in Notfn No.11/2017-CT(R) dated 28.6.2017as below:–
“Restaurant service” means supply, by way of or as part of any service, of goods, being food or any other article for human consumption or any drink, provided by a restaurant, eating joint including mess, canteen, whether for consumption on or away from the premises where such food or any other article for human consumption or drink is supplied.”
c) The explanatory notes to the classification of service state that “restaurant service” includes services provided by Restaurants, Cafes and similar eating facilities including takeaway services, room services and door delivery of food. Therefore, it is clear that takeaway services and door delivery services for consumption of food are also considered as restaurant service and, accordingly, service by an entity, by way of cooking and supply of food, even if it is exclusively by way of takeaway or door delivery or through or from any restaurant would be covered by restaurant service. This would thus cover services provided by cloud kitchens/central kitchens.
d) Accordingly, as recommended by the Council, it is clarified that service provided by way of cooking and supply of food, by cloud kitehens/central kitchens are covered under “restaurant service”, as defined in Notfn No.11/2017-CT(R) dated 28.6.2017 and attract 5% GST [without ITC].”
Analysis & Conclusion by ARA.─The aforesaid circular has clarified that when the service is provided by an entity, by way of cooking and supply of food, even if it is through or from any restaurant, it would be covered by restaurant service. The circular has categorically mentioned that this would thus cover services provided by cloud kitchens/central kitchens.
Hence, we find that the supply of food by the entity partially or completely cooked in the central kitchen through or from the various eating joints would be covered by ‘restaurant service’ and the supply of all the items of food and beverages offered by the eating joints/central kitchen of applicant are classifiable under HSN 9963 under Sl. No. 7(ii) of Notfn No.11/2017-CT(R) dated 28.6.2017 as amended time to time and are taxable at the rate of 5% (without 1TC).
3. Now, we are required to discuss the second question of the applicant which is related to the classification and applicable tax rate on the supply made by the applicant. In this regard, we are of the view that in the instant case supply made by the applicant is classifiable under Chapter, Section or Heading 9963 under Sl. No. 7(ii) of Notfn No.11/2017-CT(R) dated 28.6.2017 as amended time to time and is taxable at the rate of 5% (without ITC).
4. Now, we are required to discuss the Third & forth question of the applicant which is related to availability of ITC to the applicant if the supply considered as supply of goods or as supply of service. In this regard, we find that supply to be made by the applicant is covered under “restaurant service”, as defined in Notfn No.11/2017-CT(R) dated 28.6.2017 as amended and atract 5% GST (2.5% CGST + 2.5% SGST) provided that credit of input tax charged on goods and services used in supplying the service has not been taken. The aforesaid notfn is prescribing rate with specific condition, no option is provided. Wherever the intention to provide option is there, it is clearly mentioned by providing multiple rates ‘with ITC’ and ‘without ITC’. Thus, we find that applicant is not entitled to take ITC as per condition laid down at SI. No. 7(ii) of Notfn No.11/2017-CT(R) dated 28.6.2017.
5. Ruling.─ In view of the foregoing, the ARA ruled as follows:
Q.1: Whether the supply of food and beverages (as per illustrative list mentioned in Statement of Facts above) by the eating joints by way of following should be treated as supply of goods or supply of services?
- Dine In • Take Away • Delivery
Ans.1: In the present case, the supply will be treated as Supply of ‘Restaurant Service’ as per clause (b) of entry 6 of the Schedule II to S.7, CGST Act, 2017.
Q.2 What should be the classification and applicable tax rate on the supply made by the applicant?
Ans.2: Supply made by the applicant are classifiable under Chapter, Section or Heading 9963 at SI. No. 7(ii) of Notfn No.11/2017-CT(R) dated 28.6.2017 as amended time to time and is taxable at the rate of 5% (without ITC).
Q.3: If the supply shall be treated as supply of goods, whether ITC will be available to the applicant?
Ans.3: As the supply in the instant case will be treated as Supply of ‘restaurant service’ as per clause (b) of entry 6 of the Schedule II to S.7, CGST Act, 2017 therefore, it will attract 5% GST (2.5% CGST +2.5% SGST) provided that credit of input tax charged on goods and services used in supplying the service has not been taken.
Q.4: If the supply shall be treated as supply of services, whether ITC will be available to the applicant?
Ans.4: As the supply in the instant case will be treated as Supply of ‘restaurant service’ as per clause (b) of entry 6 of the Schedule II to S.7, CGST Act, 2017 therefore, it will attract 5% GST (2.5% CGST + 2.5% SGST) provided that credit of input tax charged on goods and services used in supplying the service has not been taken.
——————————
Author Bio
