AUGUST 13, 2018

By K Srinivasan, IRS

SUPPLY of service, of goods, being food or any other article for human consumption or any drink, at Exhibition Halls, Events, Conferences, Marriage Halls and other outdoor or indoor functions that are event based and occasional in nature, attract 18% GST vide the recently introduced Notification No. 13/2018-Central Tax(Rate) dated 26/7/2018.

The said scheme permits full ITC subject to restrictions if any under Section 17(5) of the CGST Act.

The above supplies provided by a restaurant, eating joint including mess, canteen, whether for consumption on or away from the premises where such food or any other article for human consumption or drink is supplied, attract only 5% GST vide the self -same Notification above but under a different serial number.

There are also other riders and explanations provided therein that

a) The above rate of 5 % GST is subject to no ITC being availed on the Inputs with reference to the said supplies.

b) Provided it is supplied to places located in the premises of hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes having declared tariff of any unit of accommodation of less than seven thousand five hundred rupees per unit, per day or equivalent.

c) If the supplies are made to the places referred to above with a tariff of Seven thousand five hundred and above per unit per day or equivalent, then the same supply will attract 18% GST, with full ITC, of course.

d) It is also explained that tariff rate of Rs7,500/- or below or above, per day will denote the value of supply as against the pre amendment concept of declared tariff value.

e) The above supplies include also such supplies made at a canteen, mess, Cafeteria or dining space of an institution such as a school, college, hospital, industrial unit, office, by such institution or by any other person based on a contractual arrangement with such institution for such supply, provided that such supply is not event based or occasional.

f) But, excludes the above supplies made to places namely Exhibition Halls, Events, Conferences, Marriage Halls and other outdoor or indoor functions that are event based and occasional in nature, meaning in the above cases it will attract 18% GST.

The above differential rate of 5% GST, however, after much deliberations, is also extended to such Supply made by the Indian Railways or Indian Railways Catering and Tourism Corporation Ltd. or their licensees, whether in trains or at platforms.

The short point is, Restaurant service, after much hue and cry and strikes by restaurants Nation-wide has been extended the differential rate of 5 % GST whether with or without air-conditioning facilities.

The said restaurant services are still covered under the ambit of Composition scheme, wherein it is possible for the supplier to pay 5% GST on the turnover subject to a maximum turnover in a financial year capped at 1.5 crores.

The point to note here is that the said tax brunt must be borne by the service provider without passing it on to the Consumers.

It isequally noteworthy to mention that the above service is the only exception to the applicability of Composition scheme to Services for otherwise it is fully meant only for small traders of goods whose turnover in a financial year is 1.5 crores.

But, very recently supply of services of all types not exceeding a turnover of 5 lakhs in the previous financial year or 10% of the total turnover whichever is higher, are allowed to be combined with the supply of goods, by relaxing the earlier restriction of it being applicable to only goods, except restaurant service.

The rationale behind such relaxation is anybody's guess that goods can't be purely supplied without the aid of supply of services.

A good example will be supply of any goods despite some amount of services supplied with it though capable of being absorbed under its own ambit as composite supply, can still remain as mixed supply of services separable from goods.

Now, turning to the subject again, the fact that food and beverages with or without alcoholic liquor for human consumption, supplied at Luxury and Star Hotels were earlier charged to Luxury Tax which has been dispensed with under GST, is good enough reason to charge it to a differential tax rate of 18% even though it falls within the same category of supply of food at present.

Therefore, it is nobody's concern that such supplies are charged to 18% GST when supplied at those luxury places/Hotels/Inns etc.

But when supplied to rest of the places, such supplies made should attract a uniform rate of 5% GST, stands to reason and common sense.

The Author had spent time for the sake of ease of understanding of taxpayers if not for the Consultants and tax practitioners, in putting the contents of the above Notification down in an easily understandable blank prose.

Following the principle of one tax, one nation, if one tax of 5% GST is recommended for all kinds of restaurant services and food supplies no matter where it is supplied in a Nation with a vast majority of BPL's, with the exception of course of Luxury places, it will bring much good to the tax, tax payers who are in the end, the people of this country. Food is after all, the first of the three prime necessities of life namely Roti, Kapdaaur Makaan.

If you read the actual Notification instead, you will find condition upon condition stacked and new explanation after explanation added and old explanations omitted and what more new entries substituted.

One can witness all varieties of arithmetical operations in action all at once; addition, subtraction, substitution, division, and multiple complications.

This is only to cite one example of the post GST ease of drafting and legislating laws for the uplift of GDP of the Nation to become the third largest in the world, without being third largest in complications one would sincerely hope.

More than taxpayer friendly, the Laws should be experts unfriendly so that any man of common sense can understand the law and pay his taxes without having to recourse to a legionary of tax experts and Practitioners.

Instead, GST looks like a tectonic reform in the real sense of the term involving high-end technological skills even to pay taxes and submit a simple return. It looks impossible for taxpayers, let alone the officers, to do justice to tax compliance without going through a great deal of trouble.

The drafting of legislations and advisories of foreign jurisdictions are not a matter of any pride of simplicity and clarity either when it comes to indirect taxation. The decisions of the ECJ, is more long winding and replete with axioms of Greek and Latin and the Case Laws dealt with are galore.

GST Council is at least supposed to be working on two heads-are-better-than-one principle but despite many heads put together, there seems to be no end to the outdated culture of drafting legislations full of complexities and avoidable howlers, in both subordinate and parent Legislations and advisories not to speak of Notifications.

The people of the Nation, including the taxpayers and the taxation Department of the Centre are eagerly looking for some light at the end of the tunnel very soon, by the display of co-operative federalism in the form of best outcomes of the GSTC-which is believed to be the new avatar of a Privy Council-like legislative body, for regulating the Indirect Taxation in the Country.

(The author is Assistant Commissioner, GST, Chennai and a Master Trainer, GST. The views expressed are strictly personal.)