In re MFAR Hotels & Resorts Private Ltd. (GST AAR Tamilnadu)
1. The supply of soft beverages/aerated water, whether in person or room service, by the restaurant located in the premises of the hotel of the applicant is taxable to CGST at the rate of 9% as per sl.No. 7 of Notification No. 11/2017-C.T. (Rate) dated 28.06.2017 and SGST @ 9% as per Notification No. as per SI.No. 7 of Notification No. II (2)/ CTR/ 532(d14)/2017 vide G.O. (Ms) No. 72 dated 29.06.2017 as amended.
2. The supply of cigarettes by the restaurant, in person or room service, is taxable at 14% CGST and 14% SGST as per Sl.no 14 of Schedule IV of Notification No. 1/2017-C.T. (Rate) dated 28.06.2017 and Notification No. II(2)/CTR/532(d-4)/2017 vide G.O. (Ms) No. 62 dated 29.06.2017 as amended along with the applicable GST Compensation Cess at specified rates for different kinds of cigarette products as per Notification No.1/2017-Compensation Cess (Rate) dt 28.6.2017 as amended.
3. The Supply of alcoholic liquor for human consumption by a restaurant will not be taxable under CGST/TNGST Act 2017.
4. The supply of free meals to the employees at a canteen located in the premises of the hotel of the applicant is a supply under CGST / TNGST Act 2017 and liable to CGST @ of 9% as per sl.No. 7 of Notification No. 11/2017-C.T. (Rate) dated 28.06.2017 and SGST @ 9% as per Notification No. as per Sl.No. 7 of Notification No. II (2)/ CTR/ 532(d-14)/2017 vide G.O. (Ms) No. 72 dated 29.06.2017 as amended on the value determined by Rule 28 of CGST Rules 2017.
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, TAMILNADU
Note : Any appeal against the advance ruling order shall be filed before the Tamil Nadu State Appellate Authority for Advance Ruling, Chennai under Sub-section (1) of Section 100 of CGST ACT/TNGST Act 2017 within 30 days from the date on which the ruling sought to be appealed against is communicated.
At the outset, we would like to make it clear that the provisions of both the Central Goods and Service Tax Act and the Tamil Nadu Goods and Service Tax Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Service Tax Act would also mean a reference to the same provisions under the Tamil Nadu Goods and Service Tax Act.
MFAR HOTELS & RESORTS PRIVATE LIMITED, 154/6, Velachery Main Road, Velachery, Chennai-600042.(hereinafter referred to as ‘Applicant’) is registered under the GST Act 2017 vide GSTIN No. 33AABCM9267F1ZF. The Applicant owns and manages hotel and resorts. The applicant has preferred an application seeking Advance Ruling on the following questions:
1. What is the rate of tax applicable on the supply of Soft Beverages (Aerated Water) and Tobacco (Smokes) when these items are supplied independently and not as composite supply in the restaurant? In other words what is the rate of GST if these items alone are supplied and not along with food as Composite supply to the guest?
2. Whether supply of liquor is deemed to be the “exempt supply” under GST Act as per Section 2(47) of CGST Act for the purpose of proportionate reversal of ITC as per Rule 42 of CGST rules 2017?
3. It is obligatory on the part of employer to supply free food to the employees. Whether such free supply of food is liable to reverse ITC on inputs as per Rule 42 of CGST Rules 2017?
The Applicant has submitted the copy of application in Form GST ARA – 01 and submitted a copy of Challan evidencing payment of application fees of Rs.5,000/ – each under Sub-rule (1) of Rule 104 of CGST rules 2017 and SGST Rules 2017.
2.1 The applicant has stated that they own and manage the Hotel and resorts. They offer variety of services to their customers such as rooms and suites, banquet, dining, spa, etc. Their hotels are located in the prime urban cities of Chennai and Ernakulum. They sell Tobacco (Cigarettes), soft beverages to the guest. They supply Non-GST item of liquor to the guest and provide free supply of food to their employees.
2.2 The applicant has submitted that the Tamilnadu Hotel offers variety of services such as rooms and suits, banquets, dining, spa etc.; on certain occasions at the request of guests they supply the goods of Aerated Water and Cigarette as a separate item and not as part of food in the buffet or composite supply and the billing of these items are separate.; they normally provide two types of supply in restaurant:
i. Supply of aerated water or cigarette along with supply of food and showing these items separately in the bill
ii. Supply only the aerated water or cigarette.
However, on certain occasions some of the guest will take only Aerated Water or Cigarette as walk in guest and they will not consume food. The applicant has submitted that supply of goods or services to be treated as composite supply should fulfill the following criteria
i. Supply of 2 or more goods or services together and
ii. it is a natural bundle i.e goods or services are usually provided together in the normal course of business and they cannot be separated.
The tax rate of principal supply will apply on the entire supply.
2.3 Further, in respect of supply of liquor to the guest they have made reference to Rule 42 of CGST Rules 2017 which prescribes principles or formulas for computation of ineligible credit or for pro rata reversal when the common taxable inputs and/ or services are used for making both taxable and non taxable exempt supplies.
2.4 The applicant has stated that it is obligatory on part of the employer to supply free food to the employees as per terms of employment. They have also stated that they are not maintaining a separate account for purchase of food items for canteen purposes and a single account is being maintained both for restaurant and canteen. The ITC on the inward supply of food items is taken by the applicant.
2.5 In view of the above facts, the applicant has sought the authority of Advance Ruling on the questions raised in Para 1 supra.
3.1 The applicant was given an opportunity to be personally heard on 30.08.2019. The applicant appeared before the authority for Advance Ruling and stated that they supply soft beverages, filter cigarettes exceeding 75mm (HSN 2402 2090) in restaurant and in room service. This is mentioned in their menu for restaurant/bar room service. They stated that they will submit copies of menu and sample bills for each. They stated that they are charging 28% +cess whereas the clients demand to tax 418%. They are charging cry 18% on other room & restaurant service. In respect of the 2nd and 3rd question they stated that they wish to rephrase the question regarding taxability of liquor and Supply of free food to employees. They stated that they will submit copies of menu, invoices for restaurant/bar and room service. They further stated that they serve food to their employees in a separate canteen and separate food from their business. The canteen is run in-house, though procurements are common. They also stated that they will submit copies of a sample employee contract and all other documents mentioned within 2 weeks.
3.2 The applicant was extended another Personal hearing on 07.11.2019. They appeared and submitted the invoices for serving tobacco, liquor, soft beverages at restaurant/bar and as room-service. They stated that the Guests can also come to restaurant/bar and order these items and thLy are billed as Non -Resident at the Restaurant. The menu is common for room service & restaurant. Currently they are charging only VAT for alcohol being served in Restaurant/bar. The applicant stated that they want clarification whether supply of alcohol only at restaurant/bar is exempt. They also serve tobacco, soft beverages in both restaurant and room service. They stated that in respect of alcohol under service tax they were including alcohol and on that abatement was taken along with VAT. In respect of employees there is separate canteen Café @154, which is part of contract with the employee. The applicant submitted that they wanted to know about whether such a supply is exempt and so, input tax credit reversal is available. The common inputs are electricity, security, food items etc.
3.3 In furtherance to the aforementioned Personal Hearing the applicant submitted the following documents on 27.11.2019
i. Bill copies resident/non resident
ii. Menu card details of MKC
iii. Employee contract (Ms. Namitha T Ajai dated 21st January 2019)
4. The applicant is under the administrative control of State Tax. The said jurisdictional authority was addressed to report if there are any pending proceedings in the applicant’s case on the issues raised by the applicant in the ARA application and for comments on the issues raised. The said authority did not furnish any report and also has not furnished any comments. Also, the Central Tax authorities were addressed to report if there are any pending proceedings but no reply has been received from the said authority also. Hence, it is construed that there is no proceedings pending in the case of the applicant on the questions seeking Advance ruling before us.
5. We have carefully examined the oral and written submissions of the applicant. We find that the applicant has stated that they are a 5 star hotel offering variety of services such as rooms and suites, banquets, dining, spa, etc. They supply soft beverages (Aerated water), Tobacco (smoke) on certain occasions and not as composite supply. They supply Non-GST item liquor to guest in the restaurant. They supply free food to employees as per the terms of the contract with the employees. The applicant in their application has sought ruling on the following questions:
1. What is the rate of tax applicable on the supply of Soft Beverages (Aerated Water) and Tobacco (Smokes) when these items are supplied independently and not as composite supply in the restaurant? In other words what is the rate of GST if these items alone are supplied and not along with food as Composite supply to the guest?
2. Whether supply of liquor is deemed to be the “exempt supply” under GST Act as per Section 2(47) of CGST Act for the purpose of proportionate reversal of ITC as per Rule 42 of CGST rules 2017?
3. It is obligatory on the part of employer to supply free food to the employees. Whether such free supply of food is liable to reverse ITC on inputs as per Rule 42 of CGST Rules 2017?
During Personal Hearing held on 30.08.2019, the applicant stated that in respect of 2nd and 3rd question, they wish to rephrase the questions and accordingly required ruling on
1. Taxability on Supply of Liquor in restaurant/bar and room service; and
3. Taxability on Supply of free food to their employees
6.1 The first question raised by the applicant is:
What is the rate of tax applicable on the supply of soft beverages (Aerated Water) and Tobacco (Smokes) when these items are supplied independently and not as composite supply in the restaurant? In other words what is the rate of GST if these items alone are supplied and not along with food as Composite supply to the guest?
The applicant claims that the supply is not a composite supply and has been charging the rate applicable to such supply of tobacco and soft Beverages as per Notification no. 01/2017-C.T. (Rate) dated 28.06.2017 as amended along with the applicable compensation cess. The same is considered as under.
6.2 From the submissions, it is seen that the applicant supply Soft Beverages, Filter Cigarettes exceeding 75mm(2402 2090)in restaurant and in room service. The applicant has furnished Menu of ‘Madras Kitchen Company-MKC’ which Lists
