Pioneer Bakers Archives - Tax Heal https://www.taxheal.com/tag/pioneer-bakers Complete Guide for Income Tax and GST in India Sat, 10 Oct 2026 10:55:36 +0000 en-US hourly 1 https://wordpress.org/?v=7.1.3 Bakery Food Supplies Qualify as Restaurant Service at 5% GST While Bought-Out Items Attract Goods Tax with ITC https://www.taxheal.com/m-sreedhar-reddy-and-ms-yamini-sarangi-member.html Sat, 10 Oct 2026 10:55:36 +0000 https://www.taxheal.com/?p=142354 Bakery Food Supplies Qualify as Restaurant Service at 5% GST While Bought-Out Items Attract Goods Tax with ITC Issue Whether bakery items prepared and supplied at outlets (for dine-in or takeaway) qualify as “restaurant service” taxable at 5% GST without Input Tax Credit (ITC). Whether sold bought-out celebration items (e.g., candles, balloons, knives) constitute supply… Read More »

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Bakery Food Supplies Qualify as Restaurant Service at 5% GST While Bought-Out Items Attract Goods Tax with ITC

Issue

  • Whether bakery items prepared and supplied at outlets (for dine-in or takeaway) qualify as “restaurant service” taxable at 5% GST without Input Tax Credit (ITC).
  • Whether sold bought-out celebration items (e.g., candles, balloons, knives) constitute supply of goods taxable at their respective rates under Notification No. 1/2017-Central Tax (Rate), and if ITC is admissible on them.
  • Whether a bakery that manufactures ice cream is eligible to opt for the composition scheme under Section 10 of the CGST Act.

Facts

  • Bakery Operations: The petitioner, a partnership bakery operating multiple outlets in Odisha since 1997, prepares items like cakes, pastries, pizzas, patties, sandwiches, self-manufactured ice creams, chocolates, and beverages at its outlets or a nearby workshop.
  • Service Model: Outlets provide dine-in facilities where products undergo final processing/customization for either on-premise consumption or takeaway.
  • Bought-Out Goods: Outlets also sell bought-out celebration items (birthday stickers, candles, caps, balloons, snow sprays, knives, and decorative items) without any further processing or customization.
  • Composition Scheme Claim: The petitioner sought to opt for the composition levy under Section 10 for its supplies while manufacturing ice cream.

Decision

  • Bakery Food & Beverage Supplies (In favour of Assessee): Supplies of prepared food and beverages constitute composite “restaurant service” under Entry 6(b) of Schedule II, taxable at 5% GST (2.5% CGST + 2.5% SGST) without ITC under Entry 7(i) of Notification No. 11/2017-Central Tax (Rate). The distinction between dine-in and takeaway does not alter its character as a restaurant service.
  • Bought-Out Celebration Goods (In favour of Revenue): Bought-out items sold as-is are distinct supplies of goods governed by Notification No. 1/2017-Central Tax (Rate) at their respective item rates, rather than restaurant services.
  • Admissibility of ITC on Bought-Out Goods (In favour of Assessee): Since output GST is payable on the sale of bought-out celebration items, the petitioner is entitled to claim ITC on their purchase under Section 16, subject to general statutory conditions and restrictions.
  • Ineligibility for Composition Scheme (In favour of Revenue): Under Section 10, a manufacturer of ice cream is statutorily disentitled from opting for the composition levy, regardless of whether sales occur via dine-in or takeaway.

Key Takeaways

  • Dine-In and Takeaway Treated Equally for Restaurant Services: On-premise food preparation and customization qualify as restaurant services at a 5% concessional GST rate without ITC, irrespective of whether the customer dines in or takes the food away.
  • Unprocessed Bought-Out Items Retain Character as Goods: Non-food celebration accessories sold as-is do not form part of a composite restaurant service; they attract standard goods GST rates and carry full entitlement to Input Tax Credit.
  • Ice Cream Manufacturing Disqualifies Composition Scheme: Manufacturing ice cream creates a statutory bar under Section 10 of the CGST Act, making the taxpayer ineligible for the composition levy across all business supplies.
APPELLATE AUTHORITY FOR ADVANCE RULING , ODISHA
Pioneer Bakers, In re
M. Sreedhar Reddy and Ms. Yamini Sarangi, Member
Order No. 02/Odisha–AAAR/Appeal/2024-25
DECEMBER  18, 2024
Suresh Tibrewal and Saurav Tibrewal, Advs. for the Petitioner.
Judgment
BRIEF FACTS OF THE CASE:
(At the outset we would like to make it clear that the provisions of Central Goods and Service Tax Act, 2017 and Odisha Goods and Service Tax Act, 2017 are in pari materia and have same provisions in like matter and differ from each other only on a few specific provisions. Therefore, unless a mention is particularly made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the OGST Act.)
1.0 The Assistant Commissioner, CGST & Central Excise, Sambalpur-1 Division, At-Danipalli, P.O.-Budharaja, Dist-Sambalpur (Odisha) (the jurisdictional officer) has filed an appeal on dated 28.04.2021 under Section 100 of CGST Act, 2017 and under Section 100 of OGST Act, 2017 in Form GST ARA 03 before the Appellate Authority for Advance Ruling, Odisha (hereinafter referred to as “AAAR“) against the Advance Ruling Order No. 06/ODISHA-AAR/2020-21 dated 09.03.2021/Pioneer Bakers, In re 87 GST 249/52 GSTL 216 (AAR – ODISHA) passed by the Authority for Advance Ruling, Odisha.
2.0 In the instant case, the Petitioner M/s Pioneer Bakers, At-Sahayog Nagar, P.O.-Budharaja, Dist-Sambalpur, Odisha having GSTIN No. 21AAQFP6408F1ZB is a partnership firm filed an application for Advance Ruling on 04.05.2020. M/s Pioneer Bakers submitted that they are operating under the Brand name of “Go-Cool” since the year 1997. They have established as a brand “Go-Cool” in the field of bakery items and especially in cakes. They have several outlets operating in the State of Odisha and offer a wide range of goods and services in the business of bakery items. Their principal business is producing and selling of bakery products viz. cakes, artisan cakes, pastries, pizza, patties, sandwich, self manufactured ice-creams, handmade chocolates, cookies, beverages etc. They offer a number of customization options to mere customers with respect to the above mentioned products.
2.1 M/s Pioneer Bakers has submitted that the 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 Petitioner. 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 are prepared in the nearby workshop and brought to the outlets for further customization. No items are sold directly from the workshop and each and every item is brought to the outlet for the sale. The outlets are equipped with all the facilities to dine such as table and chairs, air conditioner, drinking water, stylish lights for providing a nice ambience which provide an overall good experience to the customers. The customers are provided with the option of either enjoying their food in the outlets itself by utilizing the facilities present in the outlets or they are at the liberty to take away their food.
2.2 The Authority for Advance Ruling, Odisha after thoroughly examining the submission made by the Petitioner, their presentation during PH on dated 04.12.2020 and based upon the existing rules and regulations passed by the ruling as follows:
Q(a) Whether supply of cakes, bakery items, ice creams, chocolates, drinks and other eatable products prepared at the premises of the Petitioner 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? Ans: Yes, answer is in the affirmative.
Q(b) Whether supply of items such as birthday stickers, candles, birth Caps, snow sprays etc related items which are essentially used in birthday celebration can be classified as Composite Supply defined under Section 2 (30) of the CGST Act, 2017 and Section 2 (30) of OGST Act, 2017 wherein the Principal supply of goods consists of bakery items, chocolates while the supply of services include the supply of air conditioned place to sit and to celebrate birthday?
Ans. The answer is in the “Negative”.
Q(c) Whether the sale of handmade chocolates which are manufactured in the workshop of the Petitioner 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 restaurant services?
Ans: Yes, answer is in the affirmative.
Q(d) What is the nature and rate of tax applicable to the following items supplied from the premises of the Bakery Shop of the Petitioner ?
(i)
Items such as Birthday caps, Knife, decorative items which are bundled along with the cakes and are utilized by the Customers in the premises of the outlets.
Ans. Rates applicable as per Notification No. 01/2017-Central Tax (Rate), dated 28.06.2017 as amended from time to time.
(ii) Items such as Birthday Caps, Knife, decorative items which are bundled along with the cakes and are taken away by the Customers from the outlets.
Ans. Rates applicable as per Notification No. 01/2017-Central Tax (Rate), dated 28.06.2017 as amended from time to time.
(iii) Items such as chocolate, cookies which are prepared in the nearby workshop of the Petitioner and then processed/customized in the outlets of the Petitioner before selling to the customers. &
(iv) Items such as chocolate, cookies which are prepared in the nearby workshop of the Petitioner and the processed/customized in the outlet as per the choice and consumed in the premises itself.
Ans. The supply of the items as mentioned in Clause (iii) & (iv) from the premises of the Bakery shop of the Petitioner qualifies as ‘Composite Supply’ under Section 2 (30) of the CGST Act. The said composite supply shall be deemed to be supply of service as per Entry 6 (b) of the Schedule II to the CGST Act and more specifically the ‘Restaurant Service’ and rate of tax is 5% without any input tax credit (2.5% for CGST and 2.5% for SGST).
(e) Supposing, the Petitioner’s firm is covered under the Composite Scheme then in such cases what will be the tax liability charged on goods which are tax free without opting for composite scheme such as bread etc. Ans. Since the Petitioner is a manufacturer of ‘Ice Creams’, he is not eligible for “Composition Scheme’.
(f) Suppose, the Petitioner’s firm is covered under composite scheme, then in such circumstances whether the products which are prepared in the workshop but are sold on after certain customizations in the outlets will also be covered under the composite scheme or not?
Ans. Since the Petitioner is a manufacturer of Ice Creams’, he is not eligible for ‘Composition Scheme’.
3.0 Aggrieved by the said order passed by the Authority for Advance Ruling, Odisha, the Jurisdictional Officer i.e. Asst. Commissioner, CGST, Sambalpur-I Division, Sambalpur has filed an appeal on 28.04.2021 before the Appellate Authority for Advance Ruling, Odisha.
3.1 The Jurisdictional Officer briefly submitted that there is no dispute about the facts that the Petitioner is running a bakery business where different items like cakes, bakery items, ice creams, chocolates, drinks etc. are sold on take away basis. However, the Petitioner is neither running presently any restaurant along with the Subject bakery nor they are planning to do so in future. The instant rulings in relation to the Question Nos. (a), (c), (d)(iii) & (d)(iv) discussed supra in para 2.2 have been obtained by coloring of the facts by the Petitioner i.e. M/s. Pioneer Bakers as they are either already running a restaurant along with their subject bakery or they are planning to do so in future. The aforesaid rulings have been obtained by way of coloring the facts, therefore the said rulings are liable to be stuck down.
3.2 Accordingly, the Appellate Authority for Advance Ruling, Odisha (AAAR) after thoroughly examining the submission made by M/s Pioneer Bakers, Jurisdictional Officers and concerned officer in their presentation during PH on dated 14.07.2021 and based upon the existing rules and regulations passed the ruling in keeping the view that the establishments/outlets/premises of the Petitioner cannot be treated as restaurant. Consequently, the activities carried out by the Petitioner from their premises/outlets cannot be considered as restaurant Service. Hence, the Appellate Authority for Advance Ruling, Odisha (AAAR) passed the Order No. 02/Odisha–AAAR/Appeal/2021-22, dated 27.07.2021/Asstt. Commissioner , GST & Central Excise, In re 87 GST 450 (AAAR–ODISHA) as follows:
(a) The appeal made by the Jurisdictional Officer is allowed;
(b) The ruling made by the Authority for Advance Ruling, Odisha vide their Order No. 06/Odisha-AAR/2020-21, dt. 09.03.2021 against the Question Nos. (a), (c), (d)(iii) & (d)(iv) are set aside; and
(c) The items sold by the Petitioner M/s. Pioneer Bakers will attract the GST tariff rate as individual items.
3.3 On Aggrieved by the said order passed by the Appellate Authority for Advance Ruling, Odisha, the Petitioner (M/s Pioneer Bakers) filed a Pioneer Bakers v. Union of India [Writ Petition (C) No. 2220 of 2022, dated 25-1-2024] before the Hon’ble High Court of Orissa. Consequently, the Hon’ble High Court of Orissa passed its judgment dated 25.01.2024 wherein, the AAAR Order No. 02/Odisha–AAAR/Appeal/2021-22, dated 27.07.2021 was set aside being absolutely indefensible and the matter was remitted to the Odisha Appellate Authority for Advance Ruling for taking fresh decision after due compliance of the principle of natural justice.
PERSONAL HEARING & SUBMISSION:
4.0 In obedience to the order of Hon’ble High Court of Odisha, the then Odisha Appellate Authority for Advance Ruling once again took the instant issue under consideration and provided an opportunity to the Petitioner and jurisdictional officer for representing their case by way of Personal Hearing through Video Conference on 21.08.2024. In the meantime, the member of CT & GST, Odisha was relinquished from the charge, hence the order could not be passed in time. Further, due to administrative issue the next hearing was fixed on 07.11.2024 and an opportunity was provided to the Petitioner and jurisdictional officer for representing their case by way of Personal Hearing through Video Conference once again. Sri Suresh Tibrewal, Advocate & Sri Saurav Tibrewal, Advocate, attended the personal hearing as authorized representative of the Petitioner, M/s. Pioneer Bakers through video conference. The Assistant Commissioner, CGST, Sambalpur-I Division attended the personal hearing.
4.1 The Petitioner reiterated the submissions made vide letter dated 28.08.2024 and relied upon the CBIC Circular No. 164/20/2021-GST, dated 06.10.2021. The summary of the submission made by the Petitioner is as under:
(i) That, the Petitioner humbly submits that the report submit by the Jurisdictional Officer cannot be taken into consideration at all by this Hon’ble Authority as the same is incorrect, mala fide and is full of suppressions. The same has been prepared in a pre-determined manner and in violation of the principles of Natural Justice. Hence, the Petitioner humbly prays that this Hon’ble Authority to not to take into consideration the said report. If this Hon’ble Authority is of the opinion that a factual report is required, then it may direct the Department officials for preparation of fresh report along during the presence of the Petitioner.
(ii) That, the Petitioner is also challenging the Order dt. 27.07.2021 on the following grounds: –
(a) That, the definition and scope of “restaurants” has been explained by various other authorities and rulings, but the Judgement passed by this Hon’ble Authority based on the definition of restaurant from the “Cambridge Dictionary”. The reliance on definition from Cambridge University is erroneous as the definition of restaurant is different in different dictionaries. The inconsistency in the definitions from Dictionary is evident from the fact that the Oxford Dictionary provides the definition of restaurant “as a place where you can buy and eat a meal”.
(b) The Petitioner has cited various Judgements of different Authorities, but the Order dt. 27.07.2021 has failed to take the same into consideration. The Judgements are-
(i) That the Petitioner relied on the definition of restaurant from the Judgement of “Square One Homemade Treats, In re [2019] 110  [2020] 77 GST 477/[2019] 31 GSTL 312 (AAR – KERALA)/(GST AAR Kerala), Advance Ruling No. KER/66/2019″. In the said case, it was held that “A restaurant is a place of business where food is prepared in the premises and served based on the orders received from the customer.”
(ii) That, in a similar case, filed by Hatsun Agro Product Ltd., In re [2020] 79 GST 259/[2019] 31 GSTL 349 (AAR – KARNATAKA)/Advance Ruling No. KAR ADRG 68/2019, The Authority on Advance Rulings in Karnataka held that “The ice creams, chocolates, ice cream cakes and pizza cakes made as per the orders of the customers and served in IBACO outlet qualifies as composite supply under section 2 (30) of the CGST Act and section 2 (30) of the Karnataka Goods and Services Tax Act, 2017. The said composite supply shall be deemed to be a supply of service as per the entry 6 (b) of Schedule II to the CGST Act and entry 6 (b) of Schedule II to the KGST Act. The above supplies are classified under chapter “9963” and chargeable to tax at a rate of 2.5% subject to the conditions under CGST Act, 2017 13 as per entry no. 7(i) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, as amended by Notification No. 46/2017-Central Tax (Rate) dated 14.11.2017 from 14.11.2017 and at a rate of 2.5% subject to the conditions under KGST Act, 2017 as per entry no. 7(i) of Notification (11/2017) No. FD 48 CSL 2017 dated 28.06.2017 as amended by Notification (46/2017) No. FD 48 CSL 2017 dated 14.11.2017 from 14.11.2017.”
(iii) That, again in the case of Kundan Mishthan Bhandar, In re 74 GST 209/24 GSTL 94 (AAAR-UTTARAKHAND)/, Appeal Number Order No. 04/18-19 it was held that “Sale of sweets, namkeens, cold drinks and other edible items through restaurant will be treated as ‘composite supply’ with restaurant supply being the principal service. Existing GST rates on restaurant service will also be applicable on all such sales and no input credit will be allowed.”
c. The Petitioner is covered under the definition provided in Notification No. 11/2017-Central Tax (Rate) and Circular No. 164/20/2021-GST dated 06.10.2021 issued by the Ministry of Finance wherein the word “restaurant service” is defined as-“Restaurant service” means supply, by way of or as part of any service, of goods, being food or any other article for human consumption or any drink, provided by a restaurant, eating joint including mess, canteen, whether for consumption on or away from the premises where such food or any other article for human consumption or drink is supplied”. The explanatory notes to the classification of service state that “restaurant service” includes services provided by Restaurants, Cafes and similar eating facilities including takeaway services, room services and door delivery of food. Therefore, it is clear that takeaway services and door delivery services for consumption of food are also considered as restaurant service and, accordingly, service by an entity, by way of cooking and supply of food, even if it is exclusively by way of takeaway or door delivery or through or from any restaurant would be covered by restaurant service. This would thus cover services provided by cloud kitchens/central kitchens. It is pertinent to mention here that the services provided by the Petitioner are squarely covered under this definition and accordingly fall within the ambit of Restaurant services.
d. That, in the case of W.P.I.L. Ltd. v. CCE, Meerut  (SC)/(2005) 3 SCC 73 the Hon’ble Supreme Court had held that the clarificatory notification would take into effect retrospectively as the said notification merely clarifies the position and makes explicit what was implicit.
e. That, this Hon’ble Appellate Authority being the appellate authority failed to provide any reasons as to how the ruling dated 09.03.2021 passed by the Advance Ruling Authority is incorrect. It is humbly submitted that the order dt. 09.03.2021 was quashed without any reasons.
f. The Petitioner is providing all the services and facilities being provided in any other restaurant and as such cannot be given a discriminatory treatment. The outlets of the Petitioner are equipped with all the facilities to provide dine-in facilities such as table and chairs, air conditioner, drinking water, trendy lights for providing a nice ambience. It is necessary to mention here that, the customers are free to either avail the dine-in facilities or take away facilities but both the facilities are available from the same counter. The consideration charged to the customers for the goods sold is a consolidated charge for the following goods and services:
i. Food item supplied.
ii. Service charges for preparation/customisation/packaging as selected by the customer.
iii. Service Charge for serving the food in the prescribed manner by the customer.
iv. Air-conditioned seating facility with a nice ambience.
v. Other associated facilities such as drinking water, tissue papers, dustbins etc.
vi. The Petitioner on the basis of the above facts and established legal position hereby submits that the Goods & services supplied by the Petitioner i.e. making of bakery items, cakes, chocolates, cookies, beverages and supplying the same to customers in a specified and special manner comes within the purview of composite supply and more specifically Restaurant services and hence should attract a GST levy of 5% under the composite scheme.
g. The similarly situated persons / outlets / businesses which are carrying out the same business are taking the benefit of composite scheme and charging 5% GST being covered under the definition of restaurant.
(iii) Finally, the Petitioner has approached this Authority with a prayer for quashing the Order dt. 27.07.2021 passed by this Tribunal in Appeal No. 01/Odisha –AAAR dt.28.04.2021 and for holding that the business of the petitioner constitutes restaurant services and is eligible to tax under Entry 7 (i) of the Notification no. 11/2017-Central Tax (Rate), dt. 28.06.2017 amended by Notification no. 46/2017-Central Tax (Rate), dt. 14.11.2017.
4.2 During the P.H., the Jurisdictional Officer, Sri P.C. Hembram (Appellant), Asst. Commissioner, CGST, Sambalpur-I Division reiterated their para wise comments submitted vide Letter No. GEXCOM/LGL/MISC/192/2024-CGST-DIV-SMBP-I-COMMRTE-RKL/3990 dated 13.09.2024.
DISCUSSION & FINDINGS
5.0 We have gone through the records of the case, the ruling was given by the then Odisha State Appellate Authority of Advance Ruling vide their order No. 02/Odisha–AAAR/2021-22 dated 27.07.2021, the written submissions made by the Petitioner and the Jurisdictional Officer. We have taken note of the submission made by the authorized representatives of the Petitioner during the personal hearing through virtual mode on 07.11.2024. We have also taken into account of the submission made by the Jurisdictional Officer during the personal hearing.
5.1 We are given to understand that the Petitioner has established itself as a band in the field of bakery items and especially in cakes. The business of the Petitioner is producing and selling of bakery products viz cakes, artisan cakes, pastries, pizza, patties, sandwich, self-manufactured ice-creams, handmade chocolates, cookies, beverages etc in its various outlets operating in the state of Odisha. It was submitted that the raw materials are manufactured in the nearby workshops which are brought to the outlets for further processing. Nothing is sold directly from the workshop and each and every item is brought to the outlets for sale. Further, it has been submitted that outlets of the Petitioner are equipped with all the facilities to dine such as table and chairs, air conditioner, drinking water, stylish lights for providing nice ambience which provide an overall good experience to the customers. The customers are provided with the option of either enjoying their food in the outlets itself by utilizing the facilities present in the outlets or they are at the liberty to take away their food. At the time of personal hearing, Mr Suresh Tibrewal, Advocate stated that the outlets after a whole lot of customization options and the majority of the goods sold are processed or go through any kind of service such as special packaging, decoration, customization before reaching the customers. He has also stated that the nature of business in the present case is not merely selling of goods but is a combination of goods and services in which the customer avails the services/facilities along with the goods in the outlets of the Petitioner.
5.2 On examining the records of the instant case, it was found that the Petitioner is supplying Cake, Ice Cream and other items of food which are made to order along with certain services. Hence the Petitioner is supplying both goods and services. In order to examine as to whether the said supply satisfies the conditions of a composite supply’, it is pertinent to us to discuss the provisions of Section 2 (30) of the CGST Act.
“Composite Supply” means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with such other in the ordinary course of business, one of which is a principal supply;
Since the supplies made by the Petitioner in its outlets involve both supplies of goods and services, with one of them as principal supply i.e. supply of goods which are naturally bundled and supplied in conjunction with each other, therefore, the same has to be considered as a composite supply. Further, Restaurant Services have been defined under the purview of composite supply (in clause (b) of para 6 of Schedule-II), the relevant extract is as under.
5.3 Entry No. 6 of the Schedule-II to the Central Goods and Services Tax Act, 2017 reads as under:
The following composite supplies shall be treated as a supply of services, namely:-
(a) works contract as defined in clause (119) of section 2; and
(b) supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration.”
By virtue of the above provision, the composite supply of goods being food or any other article for human consumption or any drink, where supply or service is for a consideration, then such composite supply shall be treated as supply of services. Since the Petitioner is supplying ice creams, cakes and other eatables, which are items for human consumption, by way of or as part of any service or in any other manner, the composite supply has to be treated as a supply of services, more specifically the ‘Restaurant Service’.
5.4 As per Notification No 11/2017-Central Tax (Rate) dated 28-06-2017, as amended by notification No. 46/2017-Central Tax(Rate) dated 14-11-2017, supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or drink, where such supply or service is for cash, deferred payment or other valuable consideration, provided by a restaurant, eating joint including mess, canteen, whether for consumption on or away from the premises where such food or any other article for human consumption or drink is supplied, other than those located in the premises of hotels, inns, guest houses, clubs, campsites or other – commercial places meant for residential or lodging purposes having declared tariff of any unit of accommodation of seven thousand five hundred rupees and above per unit per day or equivalent is 5%, provided no ITC is taken on goods and services used in supplying the service.
5.5 On cursory reading of the above, it is seen that the Petitioner is supplying items of food as a part of service and since the provision of eating in the premises is provided or the customers may take the same away from the place, the transactions under question are covered under the amended provision of Entry 7 (i) of Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017 as amended by Notification No. 46/2017-Central Tax (Rate), dated 14-11-2017 and attracts a tax of 2.5% without any input tax credit.
5.6 As regards supply of 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. Sale of such bought out goods as such, is not a service but sale of goods. Entry No. 7(i) of Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017 relating to the supply of services reads as under: “Supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or drink, where such supply or service is for cash, deferred payment or other valuable consideration, provided by a restaurant, eating Joint including mess, canteen.”
Since this notification is applicable only to supply of services and not supply of goods, only Notification No. 1/2017-Central Tax (Rate) is applicable and hence all the supply of bought out goods as such which are enlisted by the Petitioner is taxable as ‘supply of goods’ and at rates applicable as per Notification No. 1/2017-Central Tax (Rate), dated 28-6-2017 as amended from time to time.
5.7 Since the goods as specified above are supplied and output tax is payable on the same, the Petitioner is eligible to take applicable input tax credit which is admissible as per the GST laws.
5.8 Given the observations stated above, the following issue wise rulings are passed:
RULING
6.0 Based on the above discussions and findings, the following ruling is passed by the AAAR Odisha State as per the questions raised by M/s Pioneer Bakers:-
Q.(a) Whether supply of Cakes, bakery items, ice creams, chocolates, drinks and other eatable products prepared at the premises of the Petitioner 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?
Ans: Yes, answer is in the affirmative.
Q.(b) Whether supply of items such as birthday stickers, candles, birthday caps, snow sprays etc. related items which are essentially used in birthday celebration can 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 include the supply of air conditioned place to sit and to celebrate birthday.
Ans: The answer is in the ‘Negative’.
Q.(c) Whether the sale of handmade chocolates which are manufactured in the workshop of the Petitioner and are utilised 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 restaurant services?
Ans. Yes, answer is in the affirmative.
Q.(d) What is the nature and rate of tax applicable to the following items supplied from the premises of the Bakery shop of the Petitioner
(i) Items such as Birthday caps, knife, decorative items which are bundled along with the cakes and are utilised by the Customers in the premises of the outlets.
Ans: will attract tax rate on supply of goods as per Notification No. 1/2017-Central Tax (Rate).
(ii) Items such as Birthday caps, knife, decorative items which are bundled along with the cakes and are taken away by the Customers from the outlets. Ans: will attract tax rate on supply of goods as per Notification No. 1/2017-Central Tax (Rate).
(iii) Items such as chocolate, cookies which are prepared in the nearby workshop of the Petitioner and then processed / customized in the outlets of the Petitioner before selling to the customers &
(iv) Items such as chocolate, cookies which are prepared in the nearby workshop of the Petitioner and then processed/customized in the outlet as per the choice and consumed in the premises itself.
Ans: The supply of the items as mentioned in clauses (iii) & (iv) from the premises of the Bakery shop of the Petitioner 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 the 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 (2.5% for CGST and 2.5% for SGST).
(e) Supposing, the Petitioner’s firm is covered under the Composite Scheme then in such cases what will be the tax liability charged on goods which are tax free without opting for composite scheme such as bread etc.
Ans: Since the Petitioner is a manufacturer of ‘Ice Creams’, he is not eligible for ‘Composition Scheme”.
(f) Suppose, the Petitioner’s firm is covered under composite Scheme, then in such circumstances whether the products which are prepared in the workshop but are sold only after certain customizations in the outlets will also be covered under the composite scheme or not?
Ans: Since the Petitioner is a manufacturer of ‘Ice Creams’, he is not eligible for ‘Composition Scheme’.
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