Hotelier Liable To 18% GST Not 28% On Supply Of Carbonated Beverages, For Dine-In/Room Service : West Bengal AAR

In a ruling by Shri. Shafeeq S (Member- Central Tax) and Shri. Jaydip Kumar Chakrabarti (Member-State Tax) examined the two kinds of supply of Aerated Drinks viz. (i) With food (shown separately in bill and (ii) Individually (only aerated water). The West Bengal AAR considering the 'factual matrix' observed that supply of aerated beverages with restaurant service to be consumed at the premises itself was to be treated as a 'composite' one and not an individual supply. To illustrate, the West Bengal AAR noted that there was no over-the-counter sale of sealed bottles/cans and hence the Applicant was supplying Carbonated Drinks with food which constitutes as 'composite supply of service'.

As a single invoice was issued for food and drinks by the restaurant, but different tax rates were applied (18% for food, 28%+cess for drinks), Applicant sought for advance ruling on appropriate rate of tax applicable.

Applicant has a restaurant at the hotel premises. As a hotelier offering variety of services such as accommodation in rooms and suites, banquets, dining, spa etc, the primary intention of Applicant was to provide its customers a complete dining experience including consumption of Food & Beverages including Aerated Beverages in the said restaurant.

Applicant submitted that when the guest requested, applicant would supply Aerated Beverages as a separate item and not as part of food or composite supply and the billing of these items were separate. Applicant submitted that it was currently paying 28% GST + 12% Cess on aerated beverages, but Customers demand 18% GST (same as restaurant services). It was further submitted that Applicant had no separate 'take away' counter and customers order as well as consume at the restaurant itself. Applicant relied on Section 2(30) CGST Act (Composite Supply), Schedule II, Para 6(b) (food & drinks supplied as part of service constituted as supply of service), Notification 11/2017-CT (Rate) – restaurant service taxable @18%, Circular 164/20/2021-GST (food/beverages supplied by restaurant was a service).

Carbonated Drinks (Aerated Beverages) supplied independently

The West Bengal AAR on rate of tax applicable on supply of Carbonated Drinks (Aerated Beverages) when supplied independently, held that if aerated beverages were supplied independently i.e. not along with food, it would be regarded as 'composite' supply of service the principal supply being restaurant service. Further, the West Bengal AAR clarified that hotel was a 'specified premises' for the ongoing financial year and so it would be taxed under serial no. 7(vi) of the Notification No. 11/2017 – Central Tax (Rate) Dated June 27, 2017.

The West Bengal AAR noted that value-added drinks like masala coke or soda were prepared by the restaurant staff upon receiving an order from the customers. The customers may order these aerated drinks either along with other food items or independently and consume at the 'specified premises' using the facilities and infrastructures of the restaurant.

Carbonated Drinks (Aerated Beverages) supplied with food

The West Bengal AAR held that if aerated beverages prepared are supplied along with food, it will be regarded as composite supply of service the principal supply being restaurant service, taxable at 18%.

Case Detail: Summit Hotels & Resorts Private Limited

For Applicant: Mr. Mayank Agarwal (Chartered Accountant)

Click here to read the AAR order.