Rahul Bose-JW Marriott Hotel fiasco: Is your food taxable?

3 min read
August 05, 2019

After the Rahul Bose moment went viral, where he had to pay Rs. 442/- for two bananas at JW Marriott, people started expressing their angst against exorbitantly high rates charged by hotels.

The price was said to be inclusive of 18% goods and services tax.

The Excise and Taxation Department, Chandigarh set up an inquiry and slapped a fine of Rs 25,000 on the hotel.

Hundreds of memes and thousands of negative comments later, the Federation of Hotel & Restaurant Associations of India said that the hotel was justified in doing so.

For the sake of clarity, let’s find out whether the food we eat in hotels is taxable or not! Hotel

To tax or not to tax

As per the law, food items are divided into four tax categories or slabs:

  • Zero tax liability- No tax can be levied on fresh fruits, vegetables, and nuts. Also, fresh foods like meat, fish, chicken, eggs, milk, buttermilk, curd, natural honey, flour, besan, bread, prasad, alt, cereal grains, palmyra jaggery cannot be taxed.
  • 5% tax- Frozen food including fruits, vegetables, fish fillet, etc, attract a tax liability of 5% above the cost price. Branded and packaged food items like skimmed milk powder, paneer, coffee, tea, spices, pizza bread, rusk, sabudana, dried tamarind, roasted gram are also taxable. Dried and preserved vegetables, fruits and nuts should be taxed as well.
  • 12% tax- Frozen meat products, butter, cheese, ghee, dry fruits in packaged form, animal fat, sausage, fruit juices, namkeen, fall under the 12% tax slab.
  • 18% tax- Biscuits, flavoured refined sugar, pasta, cornflakes, pastries, and cakes, preserved vegetables, jams, sauces, ice cream, instant food mixes, attract the costliest tax liability amongst all food products.

Was JW Marriott wrong to charge tax on fresh fruit?

As per the justification provided by the Federation of Hotel and Restaurant Associations of India (FHRAI), it is not illegal to charge 18% GST on fresh fruit. They reasoned by saying that it wasn’t the goods alone, the hotel also provided its services along with the food.

The Vice President of the FHRAI stated that “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 includes the supply of food and beverages to its guests. So, what the hotel provides includes service, quality, plates, cutlery, accompaniment, sanitized product, ambiance, luxury, etc. Therefore, it is not possible to charge for the commodity alone at the market price.”

Was it right to fine JW Marriott?

The Excise and Taxation Department of Chandigarh took suo motu action after the news broke the internet. The department served a show-cause notice to the hotel to justify the price of bananas.

It concluded that banana, being exempted from tax liability, shouldn’t have been taxed. As a penal consequence, the hotel was fined Rs 25,000/- for collecting GST on the supply of fresh fruit.

Squashing the claim of the hotel, the department maintained that the act of room service is merely an act of supplying goods. And such an act is also not taxable.

Our take

The precedent states that room service or any such service availed at a restaurant or hotel is chargeable. With ‘service’ being the essence of the hospitality industry, it is difficult to arrive at the conclusion that a room service is a mere act of supply of goods from one place to another.

As shocking as it might sound, the hotel was right in charging Rs 442 for two bananas. Now, before we go bananas (pun intended) over this, we must realise that as per the GST law and past judgments supplied by the Supreme Court, the hotel did not commit illegal activity, nor did it overcharge Rahul Bose.

It’ll be considered ‘overcharging’ if you are asked to pay an amount above the specified MRP. Then, it’ll amount to illegal activity as per the Consumer Protection law and GST rules. If the amount is exclusive of taxes, then you’ll be asked to pay more than the cost of the product.

The break-up of the transaction has to be specified on the bill that you’ll obtain from the seller.

The position of law is different when it comes to grocery stores and street vendors. In such cases, you do not have to pay any tax on fresh fruits and vegetables.

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With inputs from Nishtha Sethi

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