The Odisha Authority of Advance Ruling (AAR) ruled that the Supply of items such as birthday stickers, candles, birthday caps, snow sprays does not qualify as Composite Supply.
The Applicant, Pioneer Bakers is a registered Partnership Firm and has been operating under the Brand name of “Go cool” since the year 1997. It has established itself as a brand in the field of bakery items and especially in cakes. Further, it has several outlets operating in the state of Odisha and offers a wide range of goods and services in the business of bakery items.
The principal business of the Applicant is producing and selling bakery products viz cakes, artisan cakes, pastries, pizza, patties, sandwiches, self-manufactured ice-creams, handmade chocolates, cookies, beverages, etc. in its outlets. It is pertinent to mention here that, the applicant offers a number of customization options to its customers with respect to the above-mentioned products.
The said bakery products are manufactured either in the premises of the outlets itself and served to the customers or in its workshop which is located nearby to the premises of the outlet of the Applicant. It is pertinent to mention here that generally the raw materials such as raw chocolates, cookies, etc. are manufactured in the workshops as these goods require heavy machinery and are labour intensive in nature, and due to these features, the same is prepared in the nearby workshop and brought to the outlets for further customization. It is hereby clarified that nothing is sold directly from the workshop and each and every item is brought to the outlet for sale.
The coram of G.K.Pati and Dilip Satpathy ruled that supply of Cakes, bakery items, ice creams, chocolates, drinks, and other eatable products prepared at the premises of the applicant and supplied to the customers from the counter with the facility to consume the same in the air-conditioned premises itself covered under the restaurant services.
The Authority observed that supply of items such as birthday stickers, candles, birthday caps, snow sprays, etc related items which are essentially used in birthday celebration can not be classified as Composite Supply defined under Section 2 (30) of the CGST Act, 2017 and Section 2 (30) of the OGST Act, 2017 wherein the principal supply of goods consists of bakery items, chocolates while the supply of services includes the supply of air-conditioned place to sit and to celebrate a birthday.
“The sale of handmade chocolates which are manufactured in the workshop of the Applicant and are utilized for the purpose of providing other services such as shakes, brownies and are also retailed by packing in different containers as per the choice of the customer will be covered under the under the restaurant services,” the AAR ruled.
The AAR added, items such as birthday stickers, candles, birthday caps, Balloon, Carry Bags, snow sprays, etc, we observe that the said related items are being purchased and sold as such without any further processing in the restaurant. These items are not articles of foods and drinks and are covered under goods. The sale of such bought-out goods as such is not a service but a sale of goods. Entry No. 7 of Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017 relating to the supply of goods.
Since the goods as specified are supplied and output tax is payable on the same, the applicant is eligible to take applicable input tax credit which is admissible as per the GST laws.
“We observe that raw chocolates are manufactured in the nearby workshop of the applicant which is utilized for the purpose of providing other services such as shakes, brownies and is also retailed by packing in different containers as per the choice of the customer. In no case, chocolates are sold as such from the workshop but are customized and sold from the outlets. Therefore, we agree with the submission of the Applicant that the sale of handmade chocolates which are manufactured in the workshop and brought to the outlets for further processing will be covered under the ‘restaurant services’,” the AAR said.
The AAR held that the supply of the items namely chocolate, cookies which are prepared in the nearby workshop of the Applicant and then processed/customized in the outlets of the Applicant before selling to the customers from the premises of the Bakery shop of the Applicant qualifies as ‘composite supply’ under Section 2(30) of the CGST Act. The said composite supply shall be deemed to be a supply of service as per Entry 6(b) of Schedule II to the CGST Act and more specifically the ‘Restaurant Service’ and rate of tax is 5% without any input tax credit.
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