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.
This ruling is critical as restaurants, opting for composition scheme, are required to pay GST at the rate of 5 per cent. Also, a sweet shop not opting composition scheme will require to pay at different rates for shops and namkeens.
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.