GST on bananas: Team visits hotel, experts say no tax on fresh fruit

Hina Rohtaki
On Sunday, Rahul Bose had posted a video on Twitter after being charged Rs 442.50 for two bananas at the high-end hotel (Photo: Rahul Bose/Instagram)

A DAY after Chandigarh Deputy Commissioner and Excise and Taxation Commissioner Mandip Singh Brar ordered an investigation to probe the levying of GST on two fresh bananas at JW Marriott hotel for which actor Rahul Bose had to pay a whopping Rs 442.50, a three-member team constituted by the excise and taxation department on Thursday visited the hotel in Sector 35 and seized all the relevant records.

Excise officials said that prima facie, the case is also a violation of the Consumer Protection Act, 1986.

The committee comprised Assistant Excise and Taxation Commissioner Rajeev Chaudhary, excise and taxation officers R L Chugh and Arun Dheer.

However, no official statement was released by the hotel authorities.

AETC Chaudhary told Chandigarh Newsline, ETOs have seized all relevant records. The question here is that fresh fruits are tax-free items, whatever the case may be, and fruit platter is a taxable item. But the actor has been given fresh fruits and tax has been charged on it so we are investigating all angles. We are even probing whether relevant tax is being deposited regularly with the excise and taxation department or not.

While sources in the hotel management justified that a five-star hotel (where room rent is Rs 7,500 and above per night) can charge 18 per cent tax on sale of an item, GST experts said that as per law, fresh fruits are not taxable at all and as per law, tax is to be charged only on a taxable item.

According to chapter 803/ HSN, bananas, including plantains, fresh or dried, come under zero tax rate and are exempted.

Exempted supplies are specified in Section 11(1) of the CGST Act vide notification which include salt, fresh fruits, plastic bangles, etc. As per law, exempt supply means supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under Section 11 or under Section 6 of the Integrated Goods and Services Tax Act and includes non-taxable supply.

For the purpose of this section, where an exemption in respect of any goods or services or both from the whole or part of the tax leviable thereon has been granted absolutely, the registered person supplying such goods or services or both shall not collect the tax, in excess of the effective rate, on such supply of goods or services or both, the law says.

Experts stated that the question in this case was not about the percentage of tax but question was tax charged on a tax-free item as specified by the government.

Ajay Jagga, GST expert who is also the author of Guide to concept of GST and a senior lawyer, told Chandigarh Newsline, Under the tax law of GST, each food product has a different tax rate. Fresh fruits and vegetables have a 0% tax rate and the rates of taxes are decided by GST Council, headed by Union Finance Minister. As such the goods such as fresh fruits which are declared tax-free or at 0% cannot be sold, as it is, by charging tax on it.

He said that the department should carry out a check at all hotels which in the garb of GST were fleecing customers .

Violation of Consumer Protection Act

Jagga, who is also a member of UT Consumer Protection Cell, said that it was a violation of the Consumer Protection Act, 1986, too. In any case, he has been charged for a fruit platter and has been given just two bananas, he said. The consumer, if charged tax on tax-free goods, can move Consumer Forum challenging the act of supplier/hotel as a restrictive trade practice which is defined in the Consumer Protection Act, 1986, under section 2 (nnn) i.e. Restrictive trade practice means a trade practice which tends to bring about manipulation of price or conditions of delivery or to affect flow of supplies in the market relating to goods or services in such a manner as to impose on the consumer s unjustified costs or restrictions.

Case study of a restaurant

The expert stated that in almost a similar matter, in Tamil Nadu in July 2019, the Consumer Forum of Tirunelveli had slapped a fine of Rs 15,000 on Hotel Annapurna for charging Rs 2 as GST on curd on which no tax is leviable under HSN/Chapter 403.

Similarly the banana is taxable at the rate of 0% under HSN/Chapter 803 and accordingly charging tax on sale of banana by any hotel appears to be a clear-cut restrictive trade practice, as it is imposing unjustified costs on the consumer, Jagga said.