Confusions were prevailing in the Food industry and baseless inceptions were being drawn regarding the Sweet shops, as should be considered amongst the dine-out eatery or not. It is the GST Council which had to finally plunge in this scene and the GST Appellate brought the clear picture.
As per GST Law, he stated, Sweet shops should not be considered as an extension of a dine-out eatery and are free to enjoy the tax credit benefits only if its accounts are separately maintained.
In case, if there is an owner of a restaurant and a sweet shop who is running both the setups in the same premise, then, then he would be eligible for ITC for his sweet shop under the GST umbrella, conditioned, the Accounts for the two businesses are being maintained separately. This rule is strictly applicable in Uttarakhand.
Read Also: Input Tax Credit Ineligibility Terms & Conditions Under GST
Here when we talk about Uttarakhand, the rules stated by an appellate authority for the advance ruling (AAAR), took a toll and has been given importance keeping Authority for Advance Rulings (AAR) aside.
This case has been explained by Harpreet Singh, the partner of Indirect taxes, KPMG. He said that AAR had initially framed irrelevant rules such as sweet shops would be regarded as an extension of the restaurant.
Meanwhile, GST of 5 percent would be charged only in the condition when ITC on the used goods and services has not been set off. This rule is applicable to all the items viz, the takeaways and sold items from the sweet shop.
As we know, the restaurants draw five per cent of GST but are deprived of ITC. A shop-owner has supposedly appealed to AAAR against this order and appealed that the items which are being sold from the sweet shop, as well as the restaurant, should not be considered as composite supply.
Doing the required, AAAR abolished the AAR order and as per the nascent order from AAAR, the items sold from the restaurant would fetch a five per cent GST without Input Tax Credit.
AAAR has strictly laid out rules regarding the same and as per its provision, in such cases where the owner of the Business has two separate business, viz, the restaurant and the sweet shop, then he must have maintained a separate record for each including the 1) inputs and outputs, 2) billings and 3) other accounting records.
The rules from AAR might have some challenges for many other different scenarios, say, for an outlet selling eatables in a mall.
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Singh said “There is a thin line of difference between restaurants and food takeaway joints, kiosks or tuck shops and hence there is ambiguity surrounding classification under GST. The classification becomes blurred as supplying snacks such as chat, dhokla and lassi from shops or kiosks also involve some amount of service”.
He again added, “This ruling is likely to provide much-needed clarity on the classification principle to be adopted in all such cases”.
