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18% GST applicable on Supply of Soft Beverages or Aerated Water by the Restaurant: AAR [Read Order]

18% GST- supply of soft beverages - aerated water - restaurant - AAR - Taxscan

The Tamil Nadu Authority of Advance Ruling (AAR) ruled that 18% GST is applicable to the supply of soft beverages or aerated water by the restaurant.

The applicant, MFAR Hotels & Resorts Private Ltd. has stated that they own and manage the Hotel and resorts. They offer a variety of services to their customers such as rooms and suites, banquet, dining, spa, etc. Their hotels are located in the prime urban cities of Chennai and Ernakulum. They sell Tobacco (Cigarettes), soft beverages to the guests. They supply Non-GST items of liquor to the guests and provide free supply of food to their employees.

The applicant sought the advance ruling on various issues.

Firstly, what is the rate of tax applicable on the supply of Soft Beverages (Aerated Water) and Tobacco (Smokes) when these items are supplied independently and not as composite supply in the restaurant.

In other words what is the rate of GST if these items alone are supplied and not along with food as Composite supply to the guest.

The two-member bench of Manasa Gangotri Kata and Kulinjee Selvaan ruled that the supply of soft beverages/aerated water, whether in person or room service, by the restaurant located in the premises of the hotel of the applicant is taxable to CGST at the rate of 9% as per Notification No. 11/2017-C.T. (Rate) dated 28.06.2017 and SGST at the rate of 9% as per Notification No. as per Notification No.II (2)/ CTR/ 532(d­14)/2017 dated 29.06.2017 as amended.

Secondly, whether supply of liquor is deemed to be the “exempt supply” under GST Act as per Section 2(47) of CGST Act for the purpose of proportionate reversal of ITC as per Rule 42 of CGST rules 2017.

The Authority ruled that the supply of cigarettes by the restaurant, in person or room service, is taxable at 14% CGST and 14% SGST.

Thirdly, is it obligatory on the part of the employer to supply free food to the employees. Whether such free supply of food is liable to reverse ITC on inputs as per Rule 42 of CGST Rules 2017.

The AAR ruled that The supply of free meals to the employees at a canteen located in the premises of the hotel of the applicant is a supply under CGST / TNGST Act 2017 and liable to 18% of GST.

“The Supply of alcoholic liquor for human consumption by a restaurant will not be taxable under CGST/TNGST Act 2017,” the AAR clarified.

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