In case of hotels , doubts arises in regard to taxability under GST law of aerated waters / soft beverages , cigarettes , alcoholic liquor served in restaurant or rooms to residents / non residents of Hotel.
In this regard, the ruling of Tamil Nadu Authority of Advance Ruling (AAR) in the case of MFAR Hotels & Resorts Private Ltd is relevant wherein the AAR has given its ruling on taxability of various items supplies by the Hotel. Further in this ruling the issue of taxability of free food to employees as per terms of employment , has also been examined. Lets go through the ruling.
Facts of the Case:
- The applicant, MFAR Hotels & Resorts Private Ltd. 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.
Issues on which ruling was sought:
The applicant sought the advance ruling on following three issues.
- 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.
2. Taxability on Supply of Liquor in restaurant/bar and room service; and
- Taxability on Supply of free food to their employees as per the contract with the employees.
Order of the Tamilnadu AAR- Deliberation and Ruling:
- The serving of any items on the menu involves the supply of the items (soft beverages / aerated waters) along with the use of the facilities/ staff of the restaurant. These two are naturally bundled and supplied in conjunction each other and hence is a composite supply as per Section 2(30) of the CGST Act.
- The applicant being a 5 star hotel with license to service liquor, 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% and SGST at the rate of 9%.
- The sale of cigarettes products are not naturally bundled together with the restaurant services
as the services of the restaurant involves serving of food and beverages alone in the normal course. Hence is not a composite supply as per Section 2(30) of the Act. However, when such cigarettes products are supplied by the restaurant, a single price is charged as seen in the invoices submitted by the applicant and thus it is a mixed supply and taxable at 14% CGST and 14% SGST plus applicable compensation cess.
- As per Section 9(1) of CGST/TNGST Act, the supply of alcoholic liquor for human consumption, is a non-taxable supply. Hence, supply of alcoholic liquor for human consumption by a restaurant will not be taxable under CGST/TNGST Act.
- As per Para 2 to Schedule I of the CGST/TNGST Act, supply of free food to the employees is a supply of service and taxable on the value of such supply as determined by Rule 28 of CGST Rules, 2017. The rate applicable is CGST @ of 9% and SGST @ 9%.
In view of above deliberations the two-member bench of Manasa Gangotri Kata and Kulinjee Selvaan ruled as under:
1. 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 State Notification.
2. The supply of cigarettes by the restaurant, in person or room service, is taxable at 14% of CGST as per Sl.no 14 of Schedule IV of Notification No. 1/2017-C.T.(Rate) dated 28.06.2017 and 14% of SGST along with the applicable GST Compensation Cess at specified rates for different kinds of cigarette products as per Notification No.1/2017- Compensation Cess (Rate) dt 28.6.2017 as amended.
3. The Supply of alcoholic liquor for human consumption by a restaurant will not be taxable under CGST/TNGST Act 2017.
4. 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 CGST @ 9% as per sl. No. 7 of Notification No. 11/2017-C.T. (Rate) dated 28.06.2017 and SGST @ 9% as per relevant State Notification.
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Frah Saeed is a law graduate specializing in the core field of indirect taxes and is the Co-founder of taxwallah.com. She has authored many publications on GST and is into full-time consultancy on GST to big corporates. She as a part of taxwallah.com heads a team comprising of Chartered Accountants and Advocates and plays a key role in our mission to disseminate GST knowledge to all.
