Classification of service— In the instant case, the applicant is seeking advance ruling as to whether its activity of supply of pure food items from sweetshop who is also running a restaurant is a transaction of supply of goods or a supply of service, on the nature and rate of tax applicable on the consumable items supplied form ground floor of a sweetshop/restaurant and regarding entitlement of benefit of input tax credit with respect to the above supplies.

The taxability of all such goods supplied to or through the restaurant will be governed by the principal service i.e. restaurant service and GST rate with applicable conditions will also be applicable to all such goods also. Input credit will not be allowed in such a case.

In case the goods supplied from the restaurant are billed under restaurant head then in such a situation such transaction will purely depend upon the constituents of each individual supply and as to whether same satisfies the conditions/ingredients of a & composite supply' or 'mixed supply', as defined under section 2(30) and 2(74) of the CGST Act respectively.

Held that— (1) If the applicant opts for continuing with composition scheme under GST law, the provisions as stipulated under Section 10 of the CGST Act 2017 will be applicable for all the supplies made by the applicant and accordingly the applicant is not allowed to collect composition tax from the recipient of supplies, and neither are they allowed to take Input Tax Credit.

(2) If the applicant opts not to continue with composition scheme under GST law, then:-

(i) Supply / sale of sweets. namkeens, cold drinks and other edible items through restaurant by the applicant aptly falls under chapter heading 9963, thereby being treated as ‘composite supply’ with restaurant supply being the principal service. Applicable rates [2.5% CGST + 2 SGST], on restaurant service will also be applicable on all such sales from restaurant and no input tax credit would be available.

(ii) Supply / sale of sweets, namkeens, cold drinks and other edible items from sweetshop counter will be treated as supply of goods with applicable GST rates of the items being sold and input tax credit would be available on such supply, provided separate bills, invoices and accounting records are maintained by the applicant.

(iii) The applicant must necessarily maintain separate records for restaurant and sweetshop with respect to all input and output supply. There should also be separate bill, invoices and accounting records for restaurant and sweetshop.