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'Multiple rates, applications make GST more complicated'
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SME Times News Bureau | 17 Oct, 2021
Cloud kitchens are restaurants, ice cream parlours are not. Alcoholic
beverage is not food or a food products. Mineral rights are taxable but
the question remains whether these should be taxable at all.
The
GST regime with five major different rates and few more for certain
special products had created more confusion for taxpayers than bringing
about simplicity. This confusion often results in litigation that
affects both the authorities and well as taxpayers.
In order to
remove some of confusion created by differential tax rates and it
applications, the Revenue Department has issued a circular directed at
all the operative officials giving clarifications regarding applicable
GST rates and exemptions on certain services.
As per the
circular, the Revenue Department had clarified that service provided by
way of cooking and supply of food, by cloud kitchens/central kitchens
are covered under restaurant service and hence would be subjected to
same tax (5 per cent without ITC) as normal restaurants.
Restaurant
service means supply, by way of or as part of any service, of goods,
being food or any other article for human consumption or any drink,
provided by a restaurant/eating joint including a mess, or canteen,
whether for consumption on or away from the premises where such food or
any other article for human consumption or drink is supplied, the
clarificatory circular said.
But on similar application, supply
of of ice cream by ice cream parlours are not categorised as restaurant
services. The department said that ice cream parlorus sell already
manufactured ice cream and they do not have a character of a restaurant.
Ice cream parlours do not engage in any form of cooking at any stage,
whereas, restaurant service involves the aspect of cooking/preparing
during the course of providing service.
Thus, the circular said,
supply of ice-cream parlour stands on a different footing than
restaurant service. Their activity entails supply of ice cream as goods
(a manufactured item) and not as a service, even if certain ingredients
of service are present.
Accordingly, as recommended by the GST
Council, it is clarified that where ice cream parlours sell already
manufactured ice cream and do not cook/prepare ice cream for consumption
like a restaurant, it is supply of ice cream as goods and not as a
service, and thus ice cream sold by a parlour or any similar outlet
would attract GST at the rate of 18 per cent, the circular said.
The
circular also clarified that even if the rate schedule did not
specifically mention the service by way of grant of mining rights,
during the period July 1, 2017 to December 31, 2018, it was taxable at
18 per cent in view of the principle laid down in the 14th meeting of
the Council for residuary GST rate. Post January 1, 2019, no dispute
remains as stated above.
The Revenue Department had received
representations requesting for clarification as to the rate of GST
applicable on supply of services by way of granting mineral exploration
and mining rights during the above period. With effect from January 1
2019, the rate schedule has been specifically amended and it is
undisputed since then that such service attracts GST at the rate of 18
per cent.
With regard to alcoholic beverage, the circular
clarified that services by way of job work in relation to manufacture of
alcoholic liquor for human consumption are not eligible for the GST
rate of 5 per cent prescribed under the entry "food and food products".
It
said that as recommended by GST Council, it is clarified that the
expression "food and food products" in the said entry excludes alcoholic
beverages for human consumption. As such, in common parlance also,
alcoholic liquor is not considered as food.
The circular also
clarified that entry to amusement parks having rides or family
entertainment centre would attract 18 per cent GST and not the highest
rate of 28 per cent which applies on admission to a place having casino
or race club (even if it provides certain other activities) or admission
to a sporting event like IPL.
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