Actor Rahul Bose created quite a stir last week when he posted on Twitter photos of a bill for two bananas issued by the Marriott Hotel in Chandigarh. The selling price of the two bananas was ₹375, to which a GST of 18 per cent was added, thus making the total price ₹442.50 (₹221.25 for each banana). We do not know if he did go ahead and consume the bananas and paid the bill, since the invoice hogged all the limelight. It is believed that the hotel has been penalised ₹25,000 under Section 11 of the CGST Act, against which the hotel has appealed.

Under the Harmonised System of Nomenclature ( HSN) Code, bananas — and plantains — fall under Code 0803, for which the rate of tax is 0 per cent. An explanation to Section 11 of the CGST Act states that where an exemption in respect of any goods and/or services from the whole or part of the tax leviable has been granted absolutely, the registered person supplying them shall not collect the tax, in excess of the effective rate.

A closer look at the bill from Marriott reveals that the word ‘banana’ has not been mentioned at all, but instead the words fruit platter and food have been written. It is quite possible that Marriott was classifying the fruit platter not under the HSN Code 0803, but under some other HSN Code applicable to food products. Yet, the rate appears to be incorrect since no food products fall under the 18 per cent category.

It is also possible that Marriot can make a statement that they have collected and paid the tax, and hence have done no wrong apart from charging an incorrect rate of tax. A hotel can be supplying multiple services with different rates of tax, which would be difficult to track due to constant changes in rates.

The hotel industry has been at the receiving end of a number of anti-profiteering notices. Probably one of the first invoices that was put out in the public domain was of the Sangeetha Veg Restaurant in Chennai. The customer who made this case public had a mini-meal on November 14, 2017 which cost him ₹105 plus GST at 18 per cent. On November 16, he had the same mini-meal, expecting it to cost him less as the GST rate was from 18 per cent to 5 per cent. To his surprise, he found that the base price had been increased to ₹112 and the GST charged at 5 per cent. Such pricing changes would fall squarely under the realm of antiprofiteering under Section 171 of the CGST Act.

Though the Marriott incident is not a case of anti-profiteering, it sends out a couple of reminders to the Central Board of Indirect Taxes and Customs.

The HSN Code list is too lengthy and begs for simplification. The CBIC should move towards having only product headings for the HSN Code, and not insist on sub-catergories within products.

The Fitment Committee should be entrusted with the task of ensuring that, to the extent possible, the rates of tax under a Chapter heading be uniform.

Another take-away for the CBIC from the Marriott episode is that there no penalty specifically for cases such as this. The GST laws list 21 offences for which a taxpayer can be penalised — incorrect invoicing is not specifically included in this list. The penalty of ₹25,000 seems to have been imposed for incorrect invoicing.

Fake claims for input tax credit and fake invoices continue to exist in the GST system. It is hoped that the proposed new system of e-invoicing would reduce illegal claims for input tax credit and fake invoices.

The writer is a chartered accountant

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