The Odisha Appellate Authority of Advance Ruling (AAAR) has ruled that the bakery manufacturing ice cream is ineligible for the Composition Scheme.
The bench of M.S. Reddy and Yamini Sarangi has observed that the supply of the items namely chocolate, cookies which are prepared in the nearby workshop qualifies as ‘composite supply’ under Section 2(30) of the CGST Act. The said composite supply shall be deemed to be a supply of service as per the Entry 6(b) of Schedule II to the CGST Act and more specifically the ‘Restaurant Service’ and rate of tax is 5% without any input tax credit.
The Petitioner has established itself as a band in the field of bakery items and especially in cakes. The business of the Petitioner is producing and selling bakery products viz cakes, artisan cakes, pastries, pizza, patties, sandwich, self manufactured ice-creams, handmade chocolates, cookies, beverages etc in its various outlets operating in the state of Odisha.
It was submitted that the raw materials are manufactured in the nearby workshops which are brought to the outlets for further processing. Nothing is sold directly from the workshop and each and every item is brought to the outlets for sale. It has been submitted that outlets of the Petitioner are equipped with all the facilities to dine such as table and chairs, air conditioner, drinking water, stylish lights for providing nice ambience which provide an overall good experience to the customers.
The customers are provided with the option of either enjoying their food in the outlets itself by utilizing the facilities present in the outlets or they are at the liberty to take away their food.
The AAR held that supply of cakes, bakery items, ice creams, chocolates, drinks and other eatable products prepared at the premises of the Petitioner and supplied to the customers from the counter with the facility to consume the same in the air-conditioned premises itself covered under the restaurant services.
The AAR ruled that supply of items such as birthday stickers, candles, birth Caps, snow sprays etc related items which are essentially used in birthday celebration cannot be classified as Composite Supply defined under Section 2(30) of the CGST Act, 2017 and Section 2 (30) of OGST Act, 2017 wherein the Principal supply of goods consists of bakery items, chocolates while the supply of services include the supply of air conditioned place to sit and to celebrate birthday.
The Jurisdictional Officer submitted that the Petitioner is neither running presently any restaurant along with the Subject bakery nor they are planning to do so in future. The AAR rulings have been obtained by coloring of the facts by the Petitioner i.e. M/s. Pioneer Bakers as they are either already running a restaurant along with their subject bakery or they are planning to do so in future. The aforesaid rulings have been obtained by way of coloring the facts, therefore the said rulings are liable to be stuck down.
The AAAR held that Since the Petitioner is a manufacturer of ‘Ice Creams’, he is not eligible for `Composition Scheme’.
The AAAR has held that items such as Birthday caps, knife, decorative items which are bundled along with the cakes and are utilised by the Customers in the premises of the outlets will attract tax rate on supply of goods as per Notification No. 1/2017-Central Tax (Rate).
Ruling Details
Applicant’s Name : M/s Pioneer Bakers
Date: 10-12-2024
