Whether supply of food items at GMUs (General Minor Units) at Railway Platforms which include only counter sale of packed food items, drinks and cooked item shall be treated as “Sale of Goods” or “Sale of Services”?

PJ/Case Law/2020-2021/3580

M/s Rajeev Kumar Garg (Uttar Pradesh AAR) Advance Ruling No. 2020 (32) G. S. T. L. 549 (A. A. R. – GST – U. P.) dated 03.06.2019
Brief Facts: M/s Rajeev Kumar Garg is engaged in General Minor Units (GMU) at Railway Platforms at which counter sale of packed food items, drink and cooked items is done.
Issue:
(a) Whether supply of food items at GMUs (General Minor Units) at Railway Platforms which include only counter sale of packed food items, drinks and cooked item shall be treated as “Sale of Goods” or “Sale of Services”?
(b)If it is sale of services, whether the whole revenue shall be taxed @ 5% without ITC or can opt to pay tax @ 18% with ITC?
(c)If the taxes are paid @ 5%, whether assessee can claim the Input Tax Credit (ITC) of GST paid on license fees to Indian Railway or IRCTC?
(d)If answer to question (c) is negative, what will be the consequences for wrong availing of ITC?

Applicant’s Contention: The applicant has contended that these GMU’s are takeaway counters and no sitting space is allowed at these places. Customers purchase these food items from these takeaway counters. No services like sitting space, air-conditioning, serving of food or any other facility are made available. And so they intend to state that their supplies are ‘supply of goods’.

Reasoning of Judgement:

Answering the first question, AAR held that the supply stated by the applicant evidently falls under Chapter heading 9963with the description of Service mentioned at Sl. No. 7(ia) of the table, “Supply, of goods, being food or any other article for human consumption or any drink, by the Indian Railways or Indian Railways Catering and Tourism Corporation Ltd., or their licensees, whether in trains or at platforms.”in the notification no. 11/2017-Central tax (Rate) as amended by Notification No. 13/2018-Central Tax(Rate) dated 26.07.2018.

So it has been pronounced by the ruling that the activity carried out by the applicant is ‘Supply of Service’.

Coming to the second issue, AAR has pronounced that there is no option available to the tax payer. He has to pay tax @5% on the whole revenue as it is being clarified by Letter F. No. 354/03/2018-TRU dated 31.03.2018 as follows

“With a view to remove any doubt or uncertainty in the matter and bring uniformity in the rate of GST applicable for all kinds of supply of food and drinks made available in trains, platforms or stations, it is clarified with the approval of GST Implementation Committee, that the GST rate on supply of food and/or drinks by the Indian Railways or Indian Railways Catering and Tourism Corporation Ltd. or their licensees, whether in trains or at platforms (static units), will be 5% without ITC”.

Answering the third question, it has been pronounced that credit of license fees paid to the government is not available as the condition in Notification No. 13/2018-Central Tax (rate) dated 26.07.2018 states as follows

“provided that credit of input tax charged on goods and services used in supplying the service has not been taken [please refer to Explanation No. (iv)]”.

The fourth question is being answered in negative stating that commenting on the wrong availment of credit is outside the purview of AAR.

Comment:-Government had already issued clarifications with respect to the second and third questions put forth by the applicant. Further the AAR has rejected to comment on the fourth question as it does not fall under their purview. But in our opinion it falls under Section 97(2) of CGST Act, the relevant portion is being reiterated below.
“(2) The question on which the advance ruling is sought under this Act, shall be in
respect of,––
……..
…….
(d) admissibility of input tax credit of tax paid or deemed to have been paid;”

Prepared by- CA Akanksha Bohra

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PJ/Case Law/2020-2021/3580

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