Supply of packed food items at GMU’s at railway platform is a supply of service

Case covered:

RAJEEV KUMAR GARG

Facts of the case:

The applicant is engaged in General Minor Units (GMU) at Railway Platforms at which counter sale of packed food items, drinks, and cooked items are done. The Applicant has submitted the application for Advance Ruling dated 3-4-2019 enclosing duly filled Form ARA-01 (the application form for Advance Ruling) along with annexure and attachment. The Applicant in his application sought clarification and Advance Ruling as follows:

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

(b) If it is a sale of services, whether the whole revenue shall be taxed @ 5% without ITC under Serial No. 7(ia) of Notification No. 11/2017-C.T. (Rate), dated 28-6-2017 or assessee can opt to pay tax @ 18% with ITC under Serial No. 7(ix) of that Notification? 

(c) If the assessee pays the taxes @ 5% under Serial No. 7(ia), whether the assessee can claim the Input Tax Credit (ITC) of GST paid on license fees to Indian Railway or IRCTC?

(d) If the answer to question (c) is negative, what will be the consequences for the wrong availing of ITC?

Observations of AAR:

We have considered the submissions made by the applicant in their application for advance ruling, additional submission at the time of the personal hearing and as well as views of the Jurisdictional [ocer] on the subject. The first issue to be decided in this case is 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”, it has been observed from Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017, (as amended) Notification No. 13/2018-Central Tax (Rate), dated 26-7-2018, it is evident that the supply made/to be made by the taxpayer as detailed in their application for advance ruling, falls under Chapter Heading 9963 (Accommodation, Food and Beverage Services) with 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.” as a service. From the above notifications, it is evident that the activity carried out by the applicant is “supply of services”.

Now, coming to the second issue raised by the applicant, which is valid only if the activity is supply of services, which is already ruled by the Authority, then the issue is to whether services are to be taxed @ 5% without Input Tax Credit (ITC) under Serial No. 7(ia) of Notification No. 11/2017-C.T. (Rate) or applicant can opt to pay tax @ 18% with ITC under Serial No. 7(ix) of the same notification. On this issue, Letter F. No. 354/03/2018-TRU dated 31-3-2018 of the OSD (TRU), Ministry of Finance, Department of Revenue (Central Board of Excise and Customs) (Tax Research Unit) needs to be taken into consideration which clarifies the issue & is quoted below:-

“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”

From the above, it is clear that the services will be taxed @ 5% without ITC

In the third question, the applicant wants to clarify whether they can claim ITC of GST paid on a license fee to Indian Railways or [IRCTC] if they are paying taxes @ 5% under Serial No. 7(ia). Rate of Central Tax levied at the rate as mentioned in corresponding entry in column (4) of the Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017 read with Notification No. 13/2018-Central Tax (Rate), dated 26-7-2018 have been prescribed subject to conditions as specified in the corresponding entry in column (5) of the table if. “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)l”. [Explanation No. (iv): Wherever a rate has been prescribed in this notification subject to the condition that credit of input tax charged on goods or services used in supplying the service has not been taken, it shall mean that – (a) credit of input tax charged on goods or services used exclusively in supplying such service has not been taken; and (b) credit of input tax charged on goods or services used partly for supplying such service and partly for effecting other supplies eligible for input tax credits, is reversed as if supply of such service is an exempt supply and attracts provisions of subsection (2) of Section 17 of the Central Goods and Services Tax Act, 2017 and the rules made thereunder].

Hence, Input Tax Credit of tax paid or deemed to have been paid appears not to be admissible.

 As for the fourth part of the question is concerned it is out of the purview of the mandate of the Advance Ruling u/ s 95 (a) which provides that: “advance ruling” means a decision provided by the Authority or the Appellate Authority to an applicant on matters or on questions specified in sub-section (2) of Section 97 or sub-section (1) of Section 100, in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant.

Ruling:

Question 1:- Supply of Food items at GMUs (General Minor Units) at railway platforms which includes the only counter sale of packed food items, drinks, and the cooked item shall be treated as ‘Supply of Services’

Question 2:- Whole revenue shall be taxed @ 5% without ITC under Serial No. 7(ia) of Notification No. 11/2017- Central Tax (Rate), dated 28-6-2017.

Question 3:- Applicant cannot claim the Input Tax Credit of GST paid on license fees to Indian Railway or IRCTC. Question 4:- Question raised is out of the purview of the mandate of Advance Ruling u/ s 95(a)