In re Foodsutra Art of Spices Private Limited (GST AAR Telangana)
1. M/s. Foodsutra Art Of Spices Private Limited, D No 7-2-1813/5, Flat No 304, SVSS Nivas, Road No 1, Czech Colony Santhnagar Hyderabad, Telangana – 500018 (36AADCF9198C1ZE) has filed an application in FORM GST ARA-01 under Section 97(1) of TGST Act, 2017 read with Rule 104 of CGST/TGST Rules.
2. At the outset, it is made clear that the provisions of both the CGST Act and the TGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the TGST Act. Further, for the purposes of this Advance Ruling, the expression ‘GST Act’ would be a common reference to both CGST Act and TGST Act.
3. It is observed that the queries raised by the applicant fall within the ambit of Section 97 of the GST ACT. The Applicant enclosed copies of challans as proof of payment of Rs. 5,000/- under SGST and Rs. 5,000/- under CGST towards the fee for Advance Ruling. The Applicant has declared that the questions raised in the application have neither been decided nor are pending before any authority under any provisions of the CGST/TGST Act’2017. The application is, therefore, admitted after examining it and the records called for and after hearing the applicant as per section 98(2) of TGST Act’2017.
4. BRIEF FACTS OF THE CASE:
4.1 The applicant M/s. Foodsutra Art of Spices Private Limited is providing canteen services to ITC limited. The applicant has submitted that they have been issuing the invoices for their regular Canteen services @ 5%. Apart from that, they are also receiving a Lump Sum amount of bonus for paying their employees from their service recipient (i,e., they’re compensating them in this form ) , for that they are charging @18%. But, that their service recipient is not ready to accept the Invoice for charging @18%, instead of that they’re asking them to charge @5%.
The applicant submitted that in their view according to Section 2 (32) of CGST Act, 2017 – “consideration” in relation to the supply of goods or services or both includes – (a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government;
That their Service recipient is claiming that, they have to charge @5% by considering the reimbursement of expenses as Part of Canteen Service and they are not ready to accept it as separate service. That as the reimbursement of the bonus was not part of agreement; they agreed only for canteen service, so, the only service to be considered here was to be as canteen service by issuing Invoice @ 5%. But that the applicant’s point of view is that, they are taking this consideration for paying their employees, by acting as an intermediary, so they are ready to issue Invoice by applying 18% GST Rate. Hence the applicant requested clarification regarding relevant rate of tax under GST.
4.2 Company Background:
The applicant M/s. Foodsutra Art Of Spices Private Limited is a Private incorporated on 20 November 2019. It is classified as Non-govt company and is registered at Registrar of Companies, Hyderabad. Its authorized share capital is Rs. 16,000,000 and its paid up capital is Rs. 16,000,000. It is inolved in Hotels; camping sites and other provision of short-stay accommodation Restaurant facilities operated in connection with the provision of lodging remain classified in this group. Also included are the operation of sleeping cars when carried on by separateunits.
5. QUESTIONS RAISED:
1. Which rate has to be taken for Reimbursement of bonus?
2. Whether they have to charge same GST rate as applicable for their main service of Canteen Service also for bonus reimbursement?
3. If they have to charge the same GST rate as like Canteen Service, please specify the provision, on what basis they have to charge 5%, instead of 18 %?
6. PERSONAL HEARING:
The Authorized representatives of the unit namely Sri P. Vijaya Reddy, CA attended the personal hearing held on 24.01.2023.
1. The Authorised Representative reiterated the contentions already submitted along with the application and requested for early disposal of the case.
2. Further, the Authorised Representative/Applicant M/s. Foodsutra Art of Spices Private Limited, Hyderabad, reiterated that their case /Similar Case is not pending in any proceedings in the applicant’s case under any of the provision of the Act and have not already decided in any proceedings in the applicant’s case under any of the provisions of the Act.
Opinion expressed by Sri S.V. Kasi Visweswara Rao, Additional Commissioner (State Member), on the issues raised by the applicant.
7. DISCUSSION & FINDINGS:
The applicant is receiving regular amounts for the bills raised by them on the canteen services and annually they are receiving further amounts with the nomenclature of bonus.
Under the Section 9(1) of the CGST Act, 2017 “…there shall be levied a tax called the Central Goods and Services Tax on all intra-State supply of goods or services or both…, on the value determined under Section 15…”
The Section 15 of the CGST Act, 2017 at clause (b) of sub section (2) states that the value of supply shall include “Any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both;”
Similarly, the definition of consideration at sub section 31 of Section 2 of CGST Act, 2017 includes any payment made or to be made in response to the supply of goods or services.
A combined reading of Section 15 and definition of consideration in the CGST Act, 2017 reveals that all payments made in respect of a supply constitutes the value of supply on which tax shall be levied under the charging section i.e., Section 9 according to the rates applicable in the notifications issued under the Act.
According to the averments made by the applicant they are providing only canteen services to their recipient M/s. ITC Limited. There are no other ancillary or incidental services provided by them. Therefore the amounts received by them are in relation to supply of canteen services only. This amounts form the value of supply as defined in clause (b) of sub section (2) of Section 15 of the CGST Act, 2017 which are taxable under Section 9 of CGST Act, 2017.
In the explanation to Notification No. 11/2017 dt:28.06.2017 the restaurant services are defined as follows:
[(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.
Serial No. 7, SAC heading 9963 (Accommodation, food and beverage services) of Notification No. 11/2017 has prescribed a tax at the rate of 2.5% under CGST & SGST Acts respectively. Therefore the consideration received by the applicant as the value of supply including the amounts received in the name of bonus will be chargeable to tax at the rate of 2.5% under CGST & SGST Acts each in light of above discussion.
8. In view of the foregoing, the ruling is given by State Member as under:
In view of the above discussion, the questions raised by the applicant are clarified as below:
