GST AAR Discusses Taxability On Supply Of Sweets, Snacks And Savouries Via E-commerce Operators

The applicant in this article is M/s Shubhan Treats. It is a partnership firm with GSTN 32ADRFS5454JIZL. Address TC 4/1044/43 HEERA GRACE FLAT NO 14-C, KURAVANKONAM ROAD KOWDIAR, Thiruvananthapuram, Kerala- 695003. The firm is known as “Mishti and More”. The applicant runs a business of manufacturing and selling Indian sweets, specifically North Indian and Bengali sweets. The sweets that the applicant sold are assorted or standalone forms by their weight or pre-set packages. The sales are usually made over the counter as well as through online delivery mode. The firm also has licenses from FSSAI. The applicant also prepares and serves hot food, quick eats and beverages. And some other products, like snacks which are ready to eat, as well as some savouries which are pre-packed and sold. The applicant also provides a restaurant seating area for customers to dine in and also offers a food and beverages menu where the customer is offered fresh food and beverages as dine-in or take-away.

Questions Asked by Applicant

“Question A: Classification

1) Whether the supply of sweets, snacks and savouries as listed out in the statement of facts is a supply of goods or a supply of services?

2) Whether the supply of various food and beverage items (other than the sweets, snacks and savouries listed in the statement of facts) is a supply of goods or classifiable as restaurant services?

3) What is the appropriate classification and rate of such supply of goods/services supplied by the applicant?

Question B: Value of supplies

1) Whether the additional charges for packing, special package boxes, and delivery charges are part of the value of the supply of the respective supplies of goods or services made by the applicant?

Question c : Input Tax Credit

1) Whether the applicant is eligible for Input Tax Credit on inward supplies for provision of the outward supplies of goods sold by the applicant?

2) Whether the applicant is eligible for Input Tax Credit for restaurant services provided at the premises by the applicant as per Notification 11/2017-Central Tax (Rate)

3) Whether the applicant is liable to reverse ITC on common input goods being materials used for the manufacture of sweet and food items as per Rule 42 in light of Explanation (iv) to Notification 11/2017-CT (R)

Question D: liability to pay tax

1) Whether the applicant is liable to pay tax on the supply of sweets, savouries and other goods through Swiggy, Zomato and other E-Commerce operators?

2) Whether the applicant is liable to pay tax on the supply of food & beverages (i.e., restaurant services) made through such E-Commerce operators, in light of the provisions of Section 9(5)?”

Advance Ruling by Kerala

QA: Classification

1) The nature of the supply of goods and services depends upon its manner of supply of sweets, snacks and savouries. like, where such items are sold over the counter without service elements, and where the goods are supplied in a restaurant setting or via online delivery or is it a restaurant service?

2) The classification of multiple food and beverage items except for listed sweets, snacks, and savouries depends on how they are supplied. They will be treated as goods if sold over the counter without any service component and as restaurant service if supplied in a dine-in setting or via delivery with service elements.

3) Due to lack of sufficient information, no classification can be provided with regard to these items when supplied as goods. However, when supplied as a service, they are classifiable under SAC 9963.

QB: Value of supplies

Yes, the additional charges for packing, special package boxes, delivery charges etc. are part of value of the supply of the supplies made by the applicant.

QC: Input Tax Credit

1) Yes, the applicant is eligible for Input Tax Credit on inward supplies for provision of the outward supplies of goods sold by the applicant. However, this eligibility is subject to the provisions of Sections 16 and 17 of the CGST Act, read with Rule 42 of the Act.

2) The applicant is eligible for ITC where CGST is discharged at the rate of 6% GST as the case may be, under Notification No 11/2017 CT (Rated) dated 2-07-2017. However, this eligibility is subject to the provisions of sections 16 and 17 of the CGST Act, read with Rule 42 of the Act. If the supply is made at 2.5% GST under Notification No. 46/2017-Central Tax (Rate) dated 14-11-2017, they are not eligible for Input Tax Credit for restaurant services provided at the premises.

3) Yes, the applicant is liable to reverse ITC on common input goods, being materials used for the manufacture of sweet and food items as per rule 42 in light of Explanation (iv) to Notification 11/2017-CT (R).

QD: Liability to pay tax

1) It is for the applicant to determine, based on the nature of each supply, whether the items sold through e-commerce operators are to be classified as goods or as a restaurant service. if classified as restaurant services, the liability to pay tax rests with the e-commerce operator under Section 9(5) of the CGST Act, 2017.

2) No, the applicant is not liable to pay GST on the supply of food and beverages or restaurant service made via e-commerce operators, as such supplies fall under section 9(5) of the CGST Act, 2017, making the e-commerce operator liable to discharge the tax.