Goods vs Restaurant Service: Kerala AAR Cracks the Sweets GST Puzzle

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🍬 Sweet or Service? Kerala AAR's GST Ruling on 'Mishti & More'

📖 2 min read 🏛️ AAR Kerala · KER/13/2025 🗓️ 19-05-2025

🥮 The same rasgulla can be taxed two completely different ways. Sold over the counter, it's goods. Served on a plate or delivered with a service touch, it's a restaurant service. Kerala's AAR just spelled out where the line falls — and who pays the tax on Swiggy and Zomato orders.

Shubhan Treats, maker of North Indian and Bengali sweets under the brand 'Mishti & More', sells over the counter, via online delivery and through e-commerce operators. It approached the Kerala AAR with seven questions. Here's how each was answered. 👇

❓ Sweets, snacks & savouries — goods or service?

It depends on how they're supplied. Sold over the counter without any service element → goods. Supplied in a restaurant setting or via online delivery with service components → restaurant service.

❓ Other food & beverage items — goods or restaurant service?

Same test applies. Goods if sold over the counter with no service component; restaurant service if dine-in or delivered with accompanying service elements.

❓ Classification & rate?

When supplied as a service, they fall under SAC 9963. When supplied as goods, the AAR gave no classification — there wasn't enough information to decide.

❓ Are packing, box & delivery charges part of value? ✅ For assessee

Yes. Charges for packing, special package boxes and delivery form part of the value of supply — provided they are part of the price actually paid or payable for the transaction. (Section 15)

❓ ITC on inward supplies for goods sold? ✅ For assessee

Eligible — subject to Sections 16 & 17 read with Rule 42.

❓ ITC on restaurant services? ✅ For assessee

Eligible where GST is discharged at 6% or 9% under Notification 11/2017-CT(R) — subject to Sections 16 & 17 with Rule 42. But if supplied at 2.5% under Notification 46/2017-CT(R), no ITC is available.

❓ Reversal of ITC on common inputs?

Yes — ITC on common input goods (materials used to make sweets and food items) must be reversed as per Rule 42, read with Explanation (iv) to Notification 11/2017-CT(R).

❓ Who pays tax on Swiggy / Zomato sales? ◑ Partly for assessee

The applicant must decide, per supply, whether it's goods or restaurant service. If goods → the applicant pays GST. If restaurant service → the e-commerce operator pays under Section 9(5).

✅ Key Takeaways

  • Whether a sweet is goods or restaurant service depends entirely on the manner of supply — counter sale vs. service setting.
  • As a service, the supply is classifiable under SAC 9963; as goods, no classification was given for want of information.
  • Packing, box and delivery charges are part of the value of supply.
  • ITC is available on inputs for goods, and for restaurant service at 6%/9% — but not at the 2.5% rate. Common-input ITC must be reversed under Rule 42.
  • On e-commerce: goods → applicant pays; restaurant service → operator pays under Section 9(5).

📢 Run a sweet shop, bakery or cloud kitchen selling on Swiggy or Zomato? Share this ruling with your accountant — and drop your GST questions in the comments below. 🍡

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