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Rahul Bose banana row: Nothing illegal in charging 18% GST, says hotel body

Actor Rahul Bose

Actor Rahul Bose  

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A five-star hotel in Chandigarh charged 18% GST on bananas ordered by the actor

The Federation of Hotel and Restaurant Associations of India (FHRAI) on Tuesday reacted to an Chandigarh five-star hotel charging 18 % Goods and Service Tax (GST) on bananas ordered by actor Rahul Bose, terming it as nothing illegal, a legal requirement incumbent upon the hotel.

Mr. Bose had on July 22 posted a video on Twitter showing a bill of ₹442 charged by the hotel for two bananas. FHRAI in a statement that charging 18 % GST was a legal requirement incumbent upon the hotel. The Excise and Taxation Department of the Union Territory of Chandigarh later initiated an enquiry and fined the hotel for ₹ 25,000 for violation of section 11 of CGST (illegal collection of tax on an exempted item).

“Chain hotels have presence across several cities and follow Standard Operating Procedures (SOPs). We need to understand that the hotel is not engaged in the sale and purchase of fruits and vegetables but it provides service of accommodation as well as restaurant service which include supply of food and beverages to its guests. Unlike a retail store where bananas can be purchased at market price, a hotel offers service, quality, plate, cutlery, accompaniment, sanitised fruit, ambience and luxury and not the commodity alone. A coffee available at ten rupees at a roadside stall could be served at ₹250 in a luxury hotel,” Gurbaxish Singh Kohli, vice president, FHRAI said.

FHRAI also clarified that the hotel has done the right thing by charging 18 % GST on F&B served in the hotel premises. GST laws, FHRAI said, are not optional, but are to be charged to the customer and passed on to the government as per provisions of the law. It further said that the rate for supply of services including goods by a restaurant is 9 % CGST and 9 % UT GST (since it was Chandigarh, a union territory). The hotel and restaurant body claimed that the hotel has correctly charged the GST on the bill which was legally payable by the customer.

“Food served within the premises of a hotel with a declared tariff for accommodation of ₹7500 per day and above is chargeable under Services Accounting Code 9963 at the rate of 9 % CGST and 9 % UT GST. So, while bananas, or other unpacked fruits, are outside purview of GST at a retail store, when served in a restaurant or hotel, whether as a fruit platter or a whole fruit, as per existing GST laws a levy of 18 % is applicable. This is what the laws demand of us, and we don’t have a say in the matter,” Pradeep Shetty, joint honorary secretary, FHRAI said.

However, the apex hospitality body has issued an advisory to its members on ways to handle such situations where a guest may have ordered eatables, including fruits from outside the menu.

“Our immediate concern is conflict resolution and for such a situation to not repeat. We do not wish for guests to experience a situation like this and are deliberating on possible measures that hotels could take. We will advise our members to sensitize the staff on the subject and will advise precautionary measures to avoid such happenings in the future,” D V S Somaraju, honorary treasurer, FHRAI said

Viral video

After Mr. Bose posted the video, and it went viral, several Indian brands like Nature’s Basket, Pizza Hut, Reliance Smart, Taj Santacruz and Oyo Rooms to the Western Railways also took to social media by sharing hilarious memes and leaving netizens in spilts.

"Since the bananas were ordered in the room, they should have been treated as independent supplies subject to itemised billing. And since bananas are exempt from GST, it should not have been levied. In this case it appears that the hotel mixed up the two concepts of GST - composite supply and mixed supply versus the sale of bananas," Sachin Menon, tax and nation head of indirect tax, KPMG India.

According to the GST Act, composite supply refers to goods being bundled together. For example, air transport and food on board is a bundle offered by full service carriers. An example of mixed supply, would be a gift box consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drink and fruit juices supplied for a single price.

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Printable version | Dec 10, 2019 12:40:32 PM | https://www.thehindu.com/news/national/rahul-bose-banana-row-nothing-illegal-in-charging-18-gst-says-hotel-body/article28764247.ece

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