Revenue dept clarifies GST rates and exemptions on certain services

The Revenue dept clears the confusion about certain categories of services for GST rates and the exemptions

October 18, 2021

GST rates: Confusion for taxpayers than bringing in simplicity

To clear the confusion created by differential tax rates and their applications, the Revenue Department has issued a circular directed at all the operative officials giving clarifications regarding applicable GST rates and exemptions on certain services.

The GST regime with five major different rates and a few more for certain special products had created more confusion for taxpayers than bringing in simplicity. This confusion often results in litigation that affects both the authorities as well as taxpayers.

As per the circular, the Revenue Department clarified that service provided by way of cooking and supply of food, by cloud kitchens/ central kitchens are covered under restaurant service and hence would be subjected to the same tax (5 percent without ITC) as normal restaurants. Here, cloud kitchens are restaurants but the ice cream parlours don’t fall in the category. Alcoholic beverage is not food or a food product. Mineral rights are taxable.

But the question still remains, should it be taxable at all?

The clarificatory circular says, restaurant service is defined as supply, by way of or as part of any service, of goods, being food or any other article for human consumption provided by a restaurant/ eating joint including a mess, or canteen, whether for consumption on or a take away from where such food or any other article for human consumption or drink is supplied.

But on a similar application, the supply of ice cream by ice cream parlours is not categorized as restaurant services. The department said that ice cream parlours sell a product that is already manufactured. Ice cream parlours do not engage in any form of cooking at any stage, whereas, restaurant service involves the aspect of cooking/ preparing during the course of providing service.

Thus, the circular said, supply of ice cream parlour stands on a different footing than restaurant service. Hence ice cream sold by a parlour or any similar outlet would attract GST at the rate of 18 percent.

Their activity entails the supply of ice cream as goods (a manufactured item) and not as a service, even if certain ingredients of service are present.

The circular also clarified that even if the rate schedule did not specifically mention the service by way of grant of mining rights, during the period July 1, 2017, to December 31, 2018, it was taxable at 18 percent in view of the principle laid down in the 14th meeting of the Council for residuary GST rate. Post-January 1, 2019, no dispute remains as stated above.

With regard to alcoholic beverages, the circular clarified that services by way of job work in relation to the manufacture of alcoholic liquor for human consumption are not eligible for the GST rate of 5 percent prescribed under the entry “food and food products”. It is said that as recommended by GST Council, it is clarified that the expression “food and food products” in the said entry exclude alcoholic beverages for human consumption. As such, in common parlance also, alcoholic liquor is not considered food.

The Revenue Department had received representations requesting clarification as to the rate of GST applicable on supply of services by way of granting mineral exploration and mining rights during the above period. With effect from January 1, 2019, the rate schedule has been specifically amended and it is undisputed since then that such service attracts GST at the rate of 18 percent.

The circular also clarified that entry to amusement parks having rides or family entertainment centers would attract 18 percent GST and not the highest rate of 28 percent which applies on admission to a place having a casino or race club (even if it provides certain other activities) or admission to a sporting event like IPL.

[With Inputs from IANS]

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