18% GST on Carbonated Drinks (Aerated Water) Supplied as Part of Restaurant Service: AAR cites ‘Composite Nature’ [Read Order]

The West Bengal Authority for Advance Ruling (AAR) has held that the supply of carbonated drinks, including aerated water, when provided within the premises of the restaurant, as part of restaurant service constitutes a composite supply of service and attracts GST (Goods and Services Tax) at 18%.

The ruling was delivered against an application filed by Summit Hotels & Resorts Private Limited, which owns and operates hotels and resorts in West Bengal. The applicant runs restaurants within its hotel premises and offers dining services to both resident guests and walk-in customers. As part of its restaurant operations, the applicant supplies aerated beverages either along with food or, in some cases, independently, without any takeaway or over-the-counter sale facility.

The applicant approached the Authority seeking clarity on the applicable rate of GST on aerated beverages supplied in its restaurants. Summit Hotels submitted that it had been charging GST at 28% plus compensation cess on aerated drinks by treating them as individual supplies of goods, even when supplied in a restaurant setting.

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However, some customers demand that the supply of the aerated drinks be taxed at 18%, in line with other restaurant services.

Before the Authority, the applicant submitted that aerated beverages supplied in the restaurant are not sold in sealed bottles or cans as retail goods.

Instead, the beverages are opened by restaurant staff, poured into restaurant glassware, and are often served with ice, lemon, sugar syrup or spices as per the customers’ preference, the premises of the restaurant’s infrastructure, ambience and waiter service.

Summit Hotels accordingly argued that such supplies are naturally bundled with restaurant service and qualify as a composite supply under Section 2(30) of the CGST Act, 2017.

The Authority examined the factual matrix, the manner of supply and the statutory provisions, including Section 2(30) of the CGST Act, 2017 (Composite Supply), Section 8 ofthe CGST Act, 2017, and Clause 6(b) of Schedule II to the CGST Act, which treats the supply of food or drinks as part of a service as a supply of service.

The AAR also referred to the definition of “restaurant service” under Notification No. 11/2017–Central Tax (Rate) dated 28.06.2017.

The Authority observed that the primary intention of customers visiting the restaurant is to avail a complete dining experience, which includes food and beverages consumed within the restaurant premises. It noted that even when aerated beverages are ordered independently, they are prepared, served and consumed as part of restaurant service, making the supply inseparable from the service element.

Accordingly, the AAR bench comprising Shafeeq S. and Jaydip Kumar Chakrabarti held that the supply of carbonated drinks in such circumstances qualifies as a composite supply of service, with restaurant service being the principal supply.

Since the applicant’s restaurant is located in a specified hotel premises, the applicable rate would be 9% Central GST + 9% State GST, resulting in a cumulative 18% GST.

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