In re Shubhan Treats (GST AAR Kerala)
The Kerala Authority for Advance Ruling (AAR) recently provided clarifications to M/s Shubhan Treats, a partnership firm engaged in manufacturing and selling Indian sweets, snacks, and various food items under the brand “Mishti & More.” The firm also operates a restaurant with dine-in and takeaway options. The key questions before the AAR centered on the classification of their supplies as goods or services, the applicability of Input Tax Credit (ITC), and the tax liability for sales made through e-commerce operators (ECOs) like Swiggy and Zomato.
A significant aspect of the ruling involved distinguishing between a “supply of goods” and a “supply of services,” particularly “restaurant services.” The AAR clarified that the classification hinges on the manner of supply. Sweets, snacks, and savories sold over the counter in packaged or loose form, without any accompanying service elements, generally constitute a supply of goods. However, if these same items are supplied as part of a restaurant operation—such as for dine-in, takeaway, or through online delivery with elements like fresh preparation and packaging for immediate consumption—they are considered a supply of service, specifically restaurant service. This distinction is consistent with previous rulings, including the Appellate Authority for Advance Ruling, Uttarakhand in Kundan Misthan Bhandar (2018), and the Gujarat AAR in Re: Amaron Foods (2022) and Chhattisgarh AAR in Re: Gangaur Sweets (2022), all of which emphasize the service component in a restaurant-like setting. The AAR advised Shubhan Treats to maintain separate accounts for goods and service segments to ensure proper classification and compliance.
