Case Law Details
In re Loyal Hospitality Pvt. Ltd. (GST AAR Karnataka)
Loyal Hospitality Pvt. Ltd., operating under the brand ‘Kitchens @,’ offers comprehensive kitchen infrastructure and technology services to restaurant and food brands, referred to as Restaurant Partners. The company operates centralized remote kitchens equipped with essential infrastructure, including kitchen equipment, tools, utilities, and technological support. This setup allows Restaurant Partners to efficiently prepare and deliver their food products to customers. Loyal Hospitality charges an agreed service fee for providing these facilities.
One noteworthy aspect of this case is that Restaurant Partners are responsible for covering utility charges, including gas, electricity, water, and other operational expenses. However, the electricity and water connections are registered in the name of the landlord since the kitchens are situated in leased premises. Additionally, gas and other utilities are procured directly by Loyal Hospitality from third-party vendors.
The key question that prompted the application for advance ruling was whether the utility charges collected by Loyal Hospitality Pvt. Ltd. from its Restaurant Partners are subject to GST under the CGST/KGST Acts.
During the proceedings, the applicant had an opportunity for a personal hearing where they elaborated on their understanding of the issues related to GST implications on utility charges. However, in a subsequent communication dated 17.07.2023, Loyal Hospitality Pvt. Ltd. requested the authority to permit them to withdraw their application.
Conclusion:
In light of the applicant’s request to withdraw their application, the Authority for Advance Ruling has disposed of the case accordingly. While the specific ruling on the GST implications of utility charges remains undisclosed due to the withdrawal, this case exemplifies the complexities businesses face in navigating the GST landscape, especially in scenarios involving shared infrastructure and operational expenses.
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, KARNATAKA
M/s. Loyal Hospitality Pvt. Ltd., (herein after referred to as ‘Applicant), #14, 4th Floor, Pottery Road, Frazer Town, Bengaluru – 560 005, having GSTIN 29AACCL7396R1ZD, have filed an application for Advance Ruling under Section 97 of CGST Act, 2017 read with Rule 104 of CGST Rules, 2017 and Section 97 of KGST Act, 2017 read with Rule 104 of KGST Rules, 2017, in form GST ARA-01 discharging the fee of Rs.5,000/- each under the CGST Act and KGST Act.
The applicant stated that they operate ‘Kitchens @’ brand to provide kitchen infrastructure and technology services to restaurant/food brands (Restaurant Partners). They operate centralized remote kitchens wherein the Restaurant Partners are provided all necessary infrastructure like kitchen equipment, tools, utilities and technological support, enabling them to fully prepare and deliver their food products to customers, for which the applicant charges an agreed service fee. The Restaurant Partners are obliged to pay gas, electricity, water charges and other operational expenses (Utility Charges’) that the applicant may incur specific to the respective Restaurant Partners. Electricity and water connections are in the name of landlord as the kitchens are built in building space leased from landlord. Gas and other utilities are directly sourced by the applicant from the third party vendors.
3. In view of the above, the applicant sought advance ruling in respect of the question “Whether utility charges collected by the company from its Restaurant Partners attract GST under CGST / KGST Act?”
4. The applicant were given an opportunity of personal hearing on 13.07.2023 and Sri. Ashish Koppa, C.A. & Authorised Representative appeared and reiterated their understanding of the issues on which advance ruling was sought for. However the applicant vide their letter dated 17.07.2023, requested this authority to permit them to withdraw their application.
5. In view of the foregoing, we pass the following
RULING
The application filed by the Applicant for advance ruling is disposed off as withdrawn.
