An applicant has a sweetshop on ground floor and a restaurant on first floor of the same building. The applicant supplies sweetmeats, namkeens, dhokla etc. commonly known as snacks, cold drinks, ice creams and other edible items along with ready-to-eat items from live counters such as jalebi, chola bhatura and other edible items. In some cases, applicant also supplies sweetmeats or namkeens to a person sitting in the restaurant of a sweetshop when such products are not consumed within the premises of the applicant but are takeaway. The petitioner approached the authority to seek ruling on two issues—

1. Whether supply of pure foods such as sweetmeats, namkeens, cold drinks and other edible items from a sweetshop, which also runs a restaurant, is a transaction of supply of goods or a supply of services; and

2. What would be the rate of GST on various sweetmeats, ready-to-eat items supplied from live counters and will the applicant be entitled for input tax credit (ITC). At present, all types of sweetmeats attract GST at the rate of 5 per cent.

1. Composite Supply

According to the GST law, composite supply means supply of two or more goods or services or both together. Also, here goods or services or both are usually provided together in the normal course of business. Here, one goods and service will be treated as principal and the other as incidental. GST rate for principal will be on the entire supply.

Similarly, mixed supply means bouquets of various goods or services. Highest rate among such goods or services will be the rate for the entire supply. Here, the AAR treated restaurant as ‘principal’ and sweet shop as ‘ancillary’ and decided the tax rate accordingly.

2. Ruling on the Said Matter

The Appellate Authority said 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. However, sale of same items from the sweetshop counter will be treated as supply of goods with applicable GST rates of the items being sold and input credit will be allowed on such supply.