Case Law Details
In re Coffee Day Global Limited (GST AAR Karnataka)
The Applicant is in the business of running restaurants under the name and style of Café Coffee Day where non-alcoholic beverages and food items are served. Notification No.46/2017 dated 14.11.2017 provides that restaurants can pay GST @5% (CGST-2.5% and SGST-2.5%), provided they do not avail input tax credit of the tax paid on input goods and services. Notification No.11/2017 dated 28.06.2017, at Sl.No.35, provides for levy of GST @18% (CGST-9% & SGST-9%) on supply of unclassified services and the suppliers are entitled to take input tax credit in the circumstances where they pay output tax.
The supply of food and beverage services is covered under Heading 9963 and Group 99633 as per Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017 read with the Annexure to the said Notification. The classification of the services rendered by the applicant is, therefore, clearly defined under Service Code (Tariff) 996331.
The entries at serial number 7 of the aforesaid Notification were amended through Notification No 46/2017 -Central Tax (Rate) dated 14th November, 2017 levying a central tax of 2.5% on restaurant services as provided by the applicant under the condition that credit of input tax charged on goods and services used in supplying the service have not been taken.
The question put forth by the applicant is “Whether the applicant is entitled to pay GST @ 18% (CGST @ 9% and SGST @ 9%) and claim input tax credit?”. The rate of tax is notified in Notification 11/2017-Central Tax (Rate) dated 28th June 2017. The scheme of the Notification is such that the rate of tax is described in direct conjunction with the classification of the service represented by the Chapter, Section or Heading under which the relevant service falls. Further the explanation given under serial number 4 of the notification reads “Reference to “Chapter”, “Section” or “Heading”, wherever they occur, unless the context otherwise requires, shall mean respectively as “Chapter, “Section” and “Heading” in the annexed scheme of classification of services (Annexure).” Therefore the answer to the question raised by the applicant lies in determining the classification of the services rendered by them.
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This kind of ruling given by the Authority places Restaurants in a peculiar situation. While hotels under 5* category charge effective tax of 18% on F & B services , availing input credit which is justified, they cannot differentiate between services rendered in F & B unlike Cafe Coffee Day whose services can be classified as ruled. Ruling appears an omnibus one with Authorities likely to take a cue and slap notices on all .