Sale of bakery products like cakes, pastries, sandwiches, savouries, biscuits, slice cakes, bread, rusk, and other readymade items, fully manufactured in a factory of business concern and sold at outlets of similar concerns will be treated as supply of goods, Goa’s Authority for Advance Ruling (AAR) has said.
This means all these items will attract GST at 5 per cent just like restaurant services. However, businesses will need to maintain a clear separate record of turnover of outward supplies on account of restaurant services and separate turnover on account of supply of goods. This could raise the compliance cost.
The AAR took note of a circular clarifying taxability of supply of ice-cream by an ice-cream parlour. It was clarified that where ice cream parlors sell already manufactured ice-cream and do not cook/prepare ice-cream for consumption like at a restaurant, the supply of ice cream is viewed as goods and not as a service, even if the supply has certain ingredients of service.
Taking note of this, AAR said that same would also apply to all types of bakery products, or any other goods which are pre-manufactured at some other premises other than the restaurant premises and are supplied without involving any service attached to it. Further, it ruled that the preparation and sale of semi-finished goods such as pizzas at the outlets, wherein pizza base and toppings are supplied from the factory and are blended/prepared at the outlet upon customer’s order, constitutes “restaurant service”, irrespective of whether customer consumes them on restaurant premises or takes away.
Contrary rulings
It also opined that there is no legal impediment under GST law, which prohibits a registered taxable person from running restaurant service and supplying goods as a tender from the same place of business. It clarified that the applicant may adopt different GST rates, but it shall be the duty of the taxpayer to maintain separate records for turnover of outward supplies on account of restaurant services and those on account of supply of goods.
There have been contrary rulings on the same issue. In the matter of Pioneer Bakers, Odisha AAAR set aside AAR ruling on taxability of cakes, bakery items, ice creams, chocolates, drinks and other edible items prepared on the premises of the Applicant and supplied to customers from the counter in the outlet. West Bengal AAR, in the matter of Manoj Mittal, held that supply of food items and beverages by Applicant’s section which offers facility of eating in the same premises as takeaway shall be treated as ‘restaurant service’ and will attract 5 per cent GST.
Whereas, in the case of Square One Homemade Treats, Kerala AAR held that resale of food & bakery products does not fall under restaurant service, while clarifying that a restaurant is a place of business where food is prepared in the premises and served as per the orders received from the customers.
Published on May 8, 2026