Page 28 - GSTL_7th May 2020_Vol 36_Part 1

J10 GST LAW TIMES [ Vol. 36
a large public room where people have their meals
• Collins Dictionary
Restaurant : A restaurant is a place where you can eat a meal and pay for
it. In restaurants your food is usually served to you at your table by a
waiter or waitress
Mess : a building or room providing meals and recreational facilities for
members of the armed forces.
• Merriam-Webster Dictionary
Restaurant : a business establishment where meals or refreshments may be
purchased
From a plain reading of the dictionary meaning of the aforesaid terms, a view
emerges that a cloud kitchen may neither qualify as ‘restaurant’ nor ‘eating joint or
mess or a canteen’ since it’s a virtual kitchen that is merely accepting orders and
delivering food at customer’s doorstep. The element of service of ‘serving food’ is
missing! The customer can never see or visit and dine-out the premises of a ‘cloud
kitchen’ which can be done in the case of a restaurant/eating joint/mess, which is
the main motive of setting-up such commercial establishments. To bring added
convenience, facility of parcel/delivery is also made available to customers.
In the case of cloud kitchens, the main and only mode of service is deliv-
ery of food and drinks. Here, the element of activity of preparing food as per or-
der and the service of delivery of food to the customer’s doorstep. However,
what is missing is the main element of ‘serving food’ which is otherwise ex-
pected from a commercial establishment functioning as a restaurant/eating
joint/mess!
Further, the latter part of the definition of restaurant service reads as
‘whether for consumption on or away from the premises’ strongly indicating that
it is at the option of the customer to consume the food and drinks at the premises
of the restaurant or away from it.
Thus, it can be said that for any establishment to qualify as ‘restaurant’,
eating joint’, ‘mess’ or ‘canteen’, it should have a dine-in/sitting facility so that
the customer has a choice to consume the food at such premises or to take/order
a parcel of the same.
In the case of cloud kitchens, this cannot be fulfilled as their business
model itself is such that order for food and drinks can be accepted only through
online mode and delivery shall be made at the customer’s desired location with-
out any facility for dine-in.
Based on the above discussion, a preliminary view emerges that the def-
inition of restaurant services is not wide enough to cover ‘cloud kitchens’ at pre-
sent and thus, supplies from such kitchens may attract GST at residual rate of
18%, in absence of any other specific entry.
However, if GST is levied at 18% rate on supplies from cloud kitchens,
they may loose competitive advantage over the traditional brick and mortar res-
taurants/eating joints. With the rapidly changing business world and the ex-
treme competition in the restaurant space, high rentals and rising costs, cloud
kitchen was a much needed shift and is a gift of technology! Given that such
cloud kitchens intend to deliver restaurant services, in a technically virtual man-
ner, the Government should clarify this issue and keep cloud kitchens within the
ambit of restaurant service.
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GST LAW TIMES  7th May 2020  28