Gujarat Authority for Advance Ruling (AAR) ruled that the lower rate of 5% Good and Services Tax (GST) can be applied to the food items prepared and cooked in restaurants. However, selling readily available food items would attract the applicable rates.
The applicant (M/s Riddhi Enterprise) is in the restaurant business, offering a variety of items, including food prepared at the restaurant. Also, it sells readily consumable food and beverages over the counter. The applicant raised concern over deciding the GST rate on both types of supply, which happened at the restaurant.
The applicant stated that the restaurant staff commonly handles the orders for food and beverages to be prepared in the restaurant and sells readily available food or beverages over the counter. The sales are made irrespective of whether consumed within the restaurant or as a takeaway.
The display of food or beverage items is common for service by any method. The applicant sought a ruling concerning their tax liability under the GST regime in respect of their services.
The customers may choose to consume the readily consumable products in the restaurant or take them away to consume them elsewhere. The restaurant infrastructure to consume the readily available products shall be considered a service element. The service element shall be considered irrespective of whether the customer consumes the products within the restaurant premises or takes them away for consumption elsewhere.
AAR stated that the restaurant service is leviable at 5% GST (without input tax credit) as per notification no.3/20l7 – Central Tax (Rate) dated 28th June 2017.
The AAR held that the packed and readily consumable products were not cooked or prepared in the restaurant; however purchased from the local market and directly supplied to the customer on the same premises. After that, the customer may consume these food items at the restaurant or take them away at their place.
Accordingly, AAR held that the readily available food items not prepared in the restaurant but sold over the counter do not qualify as restaurant services. Accordingly, they fall under the supply of goods which is liable to the applicable GST rate.
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