Case Of: M/s Shubham Treats
Issued By: Kerala AAR
M/s Shubhan Treats, a firm selling sweets, snacks, and food under the brand Mishti & More, also operates a restaurant offering dine-in, takeaway, and delivery
through e-commerce operators (ECOs) like Swiggy and Zomato.
The applicant sought clarity on how to classify its supplies whether as goods or as restaurant services and the consequent implications for GST and Input Tax Credit (ITC) eligibility.
A major question involved distinguishing over-the-counter packaged or loose items from freshly prepared food supplied for immediate consumption, especially
through dine-in or online orders.
The applicant also sought clarity on ITC availability for inputs used in the preparation of goods versus restaurant services, especially given the different GST
treatment of each.
Further clarification was sought on who bears GST liability for supplies made through e-commerce platforms: the applicant or the e-commerce operators.
The AAR held that items sold in packaged or loose form for home consumption (without service elements) are classified as goods, while items supplied via dine-in, takeaway, or app-based delivery involving preparation and immediate consumption are classified as restaurant services.
For restaurant services taxed at a concessional 5% GST rate, ITC is not available on inputs used in providing such services. This restriction remains even if the same inputs are otherwise taxable.
Where common inputs are used for both taxable goods and exempt restaurant services, the taxpayer must reverse proportionate ITC under Rule 42 of CGST Rules, treating restaurant service as exempt for ITC purposes.
On sales made through ECOs, the AAR ruled that GST liability lies with the e-commerce platform (Swiggy/Zomato) for restaurant services supplied through them.
However, where goods (like sweets/snacks) are sold via ECOs without any service component or preparation for immediate consumption, GST liability continues to rest with the supplier, i.e., Shubhan Treats.