Rate to apply if there is no in-shop eating facility
A sweet shop manufacturing and selling sweets and namkeen over the counter only will be required to pay Goods & Services Tax (GST) at the rate of 1 per cent provided it is under composition scheme, Karnataka’ Authority for Advance Ruling (KAAR) has said.
A business including restaurants not serving alcohol with annual turnover up to ₹1.5 crore can opt for composition scheme. For service providers, the threshold is ₹50 lakh. For businesses engaged in manufacturing of goods or if it is a dealer of goods, it is required to pay GST at the rate of 1 per cent. For restaurants not serving alcohol and service providers, GST rates are 5 per cent and 6 per cent respectively. These businesses can not collect GST from customers and also will not get Input Tax Credit (ITC).
Composition tax payers
The applicant in the said matter, Bengaluru-based Chikkaveeranna Sweet Stall, is owning a sweet stall and is engaged in manufacturing of sweets and doing counter sales on retail basis. It moved an application for advance ruling with a question: “For composition tax payers, what is the applicable rate of GST for the manufacturing of sweet and namkeens and selling the goods over the counter not having any facility of restaurant or hotel or not a part thereof and not giving for human consumption at the place of shop.”
The applicant submitted that it is not having any facility or restaurant or hotel. He informed about paying GST at the rate of 1 per cent under composition mechanism as “he is a manufacturer of sweet and not providing any goods for human consumption at the place of shop.” AAR noted the arguments and after going through facts, it held that the applicant is the manufacturer under composition scheme and thus liable to pay GST at the rate of 1 per cent.
Sandeep Sehgal, Partner- Tax, AKM Global, a tax and consulting firm, said:, “The issue is complicated with different set of rulings. The latest judgment of Gujarat AAAR contradicts the earlier judgement on the similar issue delivered a few months ago and hence the taxation of Papad remains ambiguous. The latest judgment has added that the element of manner of consumption is also important in determining the appropriate categorisation.”
Since the introduction of GST, there have been multiple rulings related with sweet and namkin shops on various issues. For example, last year, West Bengal’s Authority for Advance Ruling (AAR) ruled that sale of sweetmeats, namkeens and bakery items from the sweet parlour is to be treated as supply of goods if the same are not served or consumed in the parlour and accordingly ITC can be availed in respect of these goods.
In 2018, Uttarakhand AAR ruled that if a sweet shop is also providing eating facility within the premise, then it will be treated as restaurant services and will be liable to pay GST at the rate of 5 per cent with ITC. This ruling might help a sweet shopkeeper with a single rate as all types of sweetmeats attract GST at the rate of 5 per cent, cake and pastries have 18 per cent, unbranded bhujia has 5 per cent and branded bhujia has 12 per cent.