Page 27 - GSTL_7th May 2020_Vol 36_Part 1

2020 ] CLOUD KITCHENS ARE FEELING THE GST THUNDER! J9

CLOUD KITCHENS ARE FEELING THE GST
THUNDER!
By
CA Krita Lodha

Restaurant industry has witnessed one of the big-
gest revolution of the era with the wave of technology
hitting the industry! Yes, the biggest one! The never
thought of idea, ‘cloud kitchens’ have become a reality in
the Indian restaurant industry.
We all are very much familiar with the cloud
technology. In the restaurant industry, cloud technology is used to host a restau-
rant kitchen that accepts incoming orders only through online ordering systems
and offers no dine-in facility. They have a base kitchen that delivers food to the
customers’ doorstep. In some cases, owners of kitchen may collaborate with the
platform owner and form synergy to provide online food services.
Cloud kitchen or the digital restaurant is the latest trend that has quickly
established itself in the restaurant space as a formidable restaurant format.
However, there is a question to ponder upon… can such cloud kitchens
be treated at par with any other brick and mortar restaurant or eating joint or a
mess and will GST @ 5% be applicable on sales made from such cloud kitchens or
whether the residual rate of 18% be applicable?
Notification No. 20/2019-C.T. (Rate), dated 30-9-2019 streamlined the
rate of GST on supply of restaurant services being 5% (without ITC) where such
services are supplied other than at ‘specified premises’ and 18%, where such ser-
vices are supplied at specified premises.
Cloud kitchens do not provide services at any ‘premises’ as such. Their
model is mainly online receipt of orders and delivery of food at customer’s loca-
tion. Thus, it is pertinent to examine if the services that they supply qualify as
‘restaurant services’ to be covered under the aforesaid entries of the notification.
The definition of the term ‘restaurant services’ as defined vide aforesaid
notification reads as under :
“(xxxii) ‘Restaurant service’ means supply, by way of or as part of any ser-
vice, of goods, being food or any other article for human consumption or any
drink, provided by a restaurant, eating joint including mess, canteen, whether
for consumption on or away from the premises where such food or any other
article for human consumption or drink is supplied.
A ‘cloud kitchen’ must qualify as a ‘restaurant’, ‘eating joint’, ‘mess’, ‘canteen’ to be
a provider of ‘restaurant service’ as envisaged in the definition.
Let’s refer to dictionary meanings of the aforesaid terms :
• Cambridge Dictionary
Restaurant : a place where meals are prepared and served to customers.
Eating joint : a bar or restaurant that serves food and/or drinks at low
price
Mess :
A room or building in which members of the armed forces have their meals
or spend their free time
GST LAW TIMES  7th May 2020  27