The AAR held that, irrespective of whether customers of Riddhi Enterprises (the applicant, which is a stand-alone restaurant) consumed food & beverages prepared and supplied to them in the restaurant itself or by way of a takeaway, it would qualify as a ‘restaurant service’. This attracts GST at 5% without input tax credit, it said.
However, the AAR benchdrew a line when it came to over-the-counter supply of ‘readily available’ food & beverage items not prepared by the restaurant, say, chocolates, chips or bottled beverages. These won’t qualify as a ‘restaurant service’ and would attract GST rate applicable to each such item, AAR held.
The AAR bench referred to a GST council meeting held in 2017 and a more recent circular issued by the Central Board of Indirect Taxes and Customs (CBIC) in October 2021, which clarified that takeaway and doorstep delivery services fall within the ambit of ‘restaurant services’. Advance rulings have a persuasive value in assessments.
“The ruling helps to further clear the air. However, challenges will arise for those restaurants who were also treating over-the-counter supply of ‘readily available’ items within the ambit of ‘restaurant service’,” said Chintan Vasa, chartered accountant at Aurtus Consulting and who represented the matter.
“In case of ice-cream parlours levying 5% GST, pursuant to a GST Council meeting, the CBIC in August 2022 clarified that while a rate of 18% would apply, past cases would be treated as fully paid to avoid unnecessary litigation. The GST Council must recommend a similar clarification for restaurants,” said Vasa.