SEPTEMBER 03, 2019

By K Srinivasan

'THE PARK' serves Bananas at its Spa; if you read an advert like this in a Five Star Hotel, don't exclaim in haste WOW! and jump at it. Not just as yet.

You might be in for a real banana split, but Rs.442.50, split into Rs.375/- for two Bananas and Rs.67.50 GST on it @ 18%, as Rahul Bose was shell-shocked recently, when JW Marriott, charged that much for serving a platter of two Bananas.

Even as ANI tweeted "Investigation of hotel JW Marriott by Excise & Taxation Department of Chandigarh, for violation of Sec 11 of the GST Act (illegal collection of tax on an exempted item) in connection with actor RB's tweet over the price of two Bananas charged to him by the Hotel", the Chandigarh State GST Department was going full swing with the investigation of the matter.

On a nice Sunday, Bose had twittered, expressing an outcry at being charged such a huge amount for two Bananas by the Hotel.

In the Bill posted on the social media by him, the Bananas were shown as Fruit Platter. An amount of Rs.375/- was charged while the remaining Rs.67.50 out of Rs.442.50, booked to GST @ 18%, as applicable to hotel service.

In the meantime, reportedly the State GST Commissioner, Chandigarh, ordered an inquiry into the matter; officers visited the hotel and gathered the relevant information to put the Hotel on a Notice, which he did after completing a detailed inquiry.

An opportunity was given to the management to explain as to why they had charged tax on the tax-free fresh fruit (Bananas) ordered by the actor.

Not hearing from the Hotel, within the deadline of one day given to them to reply to the Show cause Notice/for a personal hearing before the authorities, based on the inquiry & available records, a penalty of Rs.25,000/- had been imposed on the Hotel for illegally charging tax on a tax-free fruit item.

It is interesting to follow the mixed reactions of people on a Delhi WhatsApp group, which stunningly comprise the whole gamut of law and practice and procedure, right and the wrongs and even possible solutions and lots and lots of laughter (LOL for short in WhatsApp parlance)

So, now restaurants will split Bananas that its exempt, gives free advises, one.

In fact, the Bars have been bi-furcating the Liquor bills served at Bars though coupled with Services, right after the introduction of GST, says another.

Yes, when the total tax incidence on imported liquor is as much as 58%, it is said, how will the State Government let go of its share of revenue, even if some complicated explanation of it says it is combined with services, called a composite supply and so forth.

The long and short of it is, Liquor is outside the scope of GST and the legislation on that is, writing on the wall, takes up a sympathiser of States, since taken a hit, under GST.

Their service is also exempt for exempt product then, asks one genuinely?

I don't understand how it's violation? Since principal supply is of services, so treating it as a composite supply and higher rate should be rightly applicable for the Bananas, quips another.

True. Not understanding this! Isn't restaurant a service? Why should we go for the product rate, when Law deems it as a service, escalates the matter, yet another.

Is there anyway a fine of 250000 can be imposed on the Excise & Taxation Department, sends one a straight snide!!

One zero is more in your message compared to the ANI report, corrects the third.

Purposefully; wrongly imposing penalty should invite penalty with a zero added, justifies the poser mischievously.

Once Schedule II deems it a service, there is no question of applying the rate of the food item.

Probably, they have done it because RB wanted free publicity, otherwise how many people know him, joins in a wise Lawyer with knowledge of law and the world, a worldly wise man, as they call.

Yet another, rushes to the rescue of the Hotel, IMO, hotel is right (in my opinion- the short form for IMO, incidentally) as we may have to study the terms of the hotel.

Whether it was part of room service or not? If not, it may be goods also, volunteers the rescuer with free legal aid.

The gear shits now from Bananas to liquor!!!

Serving Liquor as part of room service, now outside GST?? Questioningly one lights a bombshell!!

No!!! booms another with a quick bomb-like response and follows it up with fumes of liquor from his eyes and here is his explanation;

Liquor is still a State subject and excisable under State Excise enactments, did you not read the GST literature and heard the AIR's blaring all the time at introduction time of GST to allay the fears of the stakeholders!!

Supply of food with drinks will be deemed to be sale of goods, he concludes, emphatically.

What about the service element involved in serving of liquor Sir, asks one innocently?

Must be a sympathiser of the Centre or a neutral one like GST, I quite can't guess from the tenor of his question.

But, a legal expert instantly senses a threat to the State revenue and its enactments and clears all doubt with an Ivanisevic return service, to gain a break point.

Here comes the second part of his trilogy, having finished the first part to a round of applause, for that also deals with another form of fiction, perhaps to justify rightly the name of the literary form. Here he goes -

After the 46th Amendment, supply of food and drinks in a hotel or restaurant, whether by way of or as part of service, by a legal fiction is deemed as a sale of goods. All the State enactments provide this, he ends that rhetoric.

Article 366(29-A)(f) deems it as sale of goods, supplements a geek with the right legal alphabet, as if the confusion reaching already tipsy heights, is not enough.

He further sharply, connects it with the new GST Law, Para 6 (b) of Schedule II of the GST Act.

A Composite supply of goods consisting of services though, declared as deemed sale under the Constitution 366(29-A) to be precise, not-withstanding the service element in it.

You can't nibble into it for your share of revenue which is not there, despite the aspect theory, retorts the geek, by an idiomatic ending, likening it to barking up a wrong tree.

Finally, when the geek admits frankly, I am at a loss to understand all this, can anyone of you please fill up these gaps for me, the Lawyer comes to his rescue reassuringly, promising to come out with his epilogue of the final part of the trilogy, over the weekend.

To conclude, why should a new law enacted to save the economy and deliver it from all its perils of the past, turn into such a laughing stock; laughing comments from Bananas to eggs…you read it right.

A fortnight ago, there was another twitter user who complained that he was charged Rs.1700/- plus GST @18% for two boiled eggs at the Four Seasons Hotel in Mumbai.

Fortunately being outside the scope of GST, all of them fail to qualify as a taxable supply in the first place.

While bananas and eggs stand excluded under exempted supply, Liquor is straight away outside the Scope of GST and still remains an entry under List II (State List) to the Seventh Schedule of Article 246. When supplied with food, it is still covered as deemed sale under Article 366(29-A)(f), which still remains in the Statute book.

The practice followed generally by Bars attached to Hotels, is to levy liquor to state VAT by a separate bill either show it as outright sale or as a deemed sale per 46th Amendment Act, 1982.

Similarly, many Hotels do show exempted supplies such as Bananas or Eggs or other Fruits and vegetables or poultry or dairy produce such as Eggs or Milk or Butter etc., supplied in their natural form, which fail to fit into the definition of a taxable supply as '0' tax as they merit no tax.

It is to be shown as items of '0' tax in the itemised bill, if the Hotel chooses to raise even a consolidated Bill to the customers and that should do the trick and put an end to these kinds of controversies, once and for all, is the humble view of the Author.

Hope the Government comes out with an early advisory on these queer issues, before our GST vocabulary is populated with words like banana republic, Egg on your face and bar to bench and what not!

(Views of the author are personal. The author is a Senior Associate, RANK Associates, Chennai.)