Sale of food items through a counter qualifies as restaurant services under GST law

Facts of the Case:-  The Applicant is engaged in the business of reselling bakery products. The applicant operates a bakery and a separate counter for selling ready-to-eat items such as Pani Puri, Masala Chat, Punjabi Lassi, Sev Puri, Samosa Chat, Vada Pav, and Pav Bhaji. These items are prepared on-site and consumed by customers at the counter.

Issue:- Whether these items, supplied through a separate counter, qualify as restaurant services and if so, whether they are taxable at the GST rate of 5%. The applicant also requests confirmation on the HSN code and tax rate adopted for these items, as well as the applicability of the composition scheme. 

Contention of the Applicant:  The applicant contends that since the items are sold in ready-to-eat condition and consumed on-site at the counter, they should be treated as restaurant services. The applicant believes these items should attract a GST rate of 5% under both regular and composite registration.

Rulings:- The AAR noted that the applicant’s operation of serving ready-to-eat items across the counter is classified under HSN 996331, which covers “Services provided by restaurants, cafes, and similar eating facilities, including takeaway services, room services, and door delivery of food.”

Applicable GST Rate:  If the service is provided from the premises of hotels, inns, guest houses, or similar commercial places with a declared tariff of ₹7,500 or above per unit per day, the GST rate is 18% (9% CGST + 9% SGST). If the above condition is not applicable, the GST rate is 5% (2.5% CGST + 2.5% SGST), provided no input tax credit is availed on goods and services used in supplying the service.

The AAR does not address the applicant's HSN code and tax rate since this information was not provided by the applicant.