CBIC issued Clarifications regarding applicable GST rates & exemptions on certain services

Representations have been received seeking clarification in respect of applicable GST rates on the following activities:

1. Services by cloud kitchens/central kitchens,

2. Supply of ice cream by ice cream parlors,

3. Coaching services to students provided by coaching institutions and NGOs under thecentral sector scheme of „Scholarships for students with Disabilities”,

4. Satellite launch services provided by NSIL.

5. Overloading charges at toll plaza,

6. Renting of vehicles by State Transport Undertakings and Local Authorities,

7. Services by way of grant of mineral exploration and mining rights attracted GST,

8. Admission to amusement parks having rides etc. ,

9. Services supplied by contract manufacture to brand owners or others for manufactureof alcoholic liquor for human consumption.

The problems were discussed at the 45th meeting of the GST Council, which took place on September 17, 2021. The following are the issue-by-issue clarifications:

Services by cloud kitchens/central kitchens:

Requests for clarification on the classification and rate of GST on services supplied by Cloud kitchen or Central Kitchen have been received.

In Notification No. 11/2017 – CTR, the term “restaurant service” is defined as follows: –

“Restaurant service” refers to the provision of goods, such as food or any other article for human consumption or any drink, by a restaurant, eating joint, mess, or canteen, whether for consumption on or off the premises where such food or any other article for human consumption or drink is provided.

According to the explanatory notes to the classification of service, “restaurant service” comprises services provided by restaurants, cafes, and similar eating establishments such as takeaway, room service, and food delivery to the customer’s door. As a result, it is clear that takeaway and door delivery services for food consumption are also considered restaurant services, and that any service provided by an entity in the form of cooking and food supply, whether exclusively through takeaway or door delivery or through or from any restaurant, is covered by restaurant service. As a result, services provided by cloud kitchens/central kitchens would be covered.

As a result, as recommended by the Council, it is clarified that services provided by cloud kitchens/central kitchens in the form of cooking and food supply fall under the category of “restaurant service,” as defined in Notification No. 11/2017- Central Tax (Rate), and are subject to a 5% GST [without ITC].

Supply of ice cream by ice cream parlors

A number of requests for clarification on the supplies given in an ice cream shop have been received.

Ice cream parlours serve pre-made ice cream and do not have the atmosphere of a restaurant. Restaurant service includes the component of cooking/preparing while providing service, whereas ice cream parlours do not engage in any type of cooking at any point. As a result, ice cream parlour supply is treated differently than restaurant service. Even though certain service ingredients are present, their action comprises the supply of ice cream as a thing (a manufactured commodity) rather than a service.

As a result, it is clarified, as recommended by the Council, that when ice cream parlours sell already manufactured ice cream and do not cook/prepare ice cream for consumption like a restaurant, it is a supply of ice cream as goods rather than a service, even if the supply contains certain service ingredients. As a result, it has been clarified that ice cream sold by a parlour or other similar business will be subject to GST at the rate of 18%.

Coaching services supplied by coaching institutions and NGOs under the central sector scheme of ‘Scholarships for students with Disabilities”

There have been requests for clarification on the application of GST to free coaching services provided by coaching institutions and non-governmental organisations (NGOs) under the central scheme of “Scholarships for students with Disabilities,” where the government covers the entire cost of coaching institutions through a grant in aid.

In this regard, entry 72 of notification No. 12/2017-Central Tax (Rate) dated June 28, 2017 exempts services provided to the Central Government, State Governments, and Union Territory Administrations under any training programme for which the Central Government, State Governments, and Union Territory Administrations bear the entire cost.

The scope of this entry is broad enough to include coaching services offered by coaching institutes and non-governmental organisations (NGOs) under the central plan of “Scholarships for students with Disabilities,” where the government pays for the entire cost of the coaching.

As a result, services provided by any institutions/NGOs under the central scheme of “Scholarships for students with Disabilities” where the total expenditure is borne by the government are covered under entry 72 of notification No. 12/2017-Central Tax (Rate) dated 28th June, 2017 and thus exempt from GST, as recommended by the GST Council.

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