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Rahul Bose-JW Marriott fiasco: Hotel charging 18% GST on bananas legal, say tax experts

Dipak Mondal     August 1, 2019

Even as everyone is going bananas over JW Marriott in Chandigarh charging Rs 442 for a pair of bananas from actor Rahul Bose, tax experts believe the brouhaha over 18 per cent GST on fresh fruit is unnecessary and the hotel was right in charging the tax.

Actor Rahul Bose had last week posted a video on social media lamenting the fact that a pair of bananas cost him Rs 442.50. The post instantly became viral and triggered debates on obscene price being charged for something as mundane as banana. As per the bill that the actor showed in the video, the hotel had charged a base price of Rs 335 for two bananas and levied 18 per cent GST over it.

Questions were raised on how the hotel could charge GST at 18 per cent on an exempted item, that is, banana. After all outrage, the Excise and Taxation Department of the Union Territory of Chandigarh imposed a fine of Rs 25,000 on the hotel after it failed to give satisfactory reply on a show-cause notice served.

While it is still not known if the fine was imposed for levying GST on an exempted item, tax experts believe that JW Marriott was right in levying GST. Anita Rastogi, partner, indirect taxes, PwC India says, one does not go to a hotel to buy banana; one goes to a hotel to avail services, and therefore a banana served to a hotel guest should be seen as a service.

"The key aspect to be examined is whether the supply is for services or goods. Typically hotels are service providers and restaurants in the hotels are considered as providing deemed services. In such cases, GST will be applied at 18 per cent or 5 per cent, depending on the category of hotels," says Anita Rastogi of PwC.

She gives an example of infant milk. On a standalone basis, milk if purchased is exempt. But if provided by the restaurant in the hotel, it will be considered as deemed supply of services, which is not exempt," she says.

Mekhla Anand, partner, Cyril Amarchand Mangaldas says that the banana row is a testament to how the more the government believes it is simplifying the legal landscape, the more it is being complicated.  In this case, she says, it appears that the confusion lies in classifying the supply as a supply of a food platter comprising bananas as part of room service vis-a-vis supply of bananas, which is an exempt supply. She also says that the cost of non- compliance even for genuine mistakes in the age of trial-by-social-media is not just a simple fine of Rs 25,000 but includes tremendous reputational damage.

Meanwhile, the Federation of Hotel and Restaurant Associations of India (FHRAI) has issued a statement saying that 18 per cent GST on bananas was a legal requirement for the hotel.

"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 services, which include supply of food and beverages to its guests," says the federation in the statement.

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