This article is written by Harshita Agrawal, pursuing a Certificate Course in Advanced Corporate Taxation from LawSikho.

What’s the banana issue

A short time ago the Banana Tweet and video of Actor Rahul Bose went viral on the internet and has gained a lot of public’s attention. During his stay in Chandigarh’s JW Marriott hotel, he ordered in the gym a couple of bananas. On returning to his room, he was appalled after receiving a bill of Rs 442.50/- on the above order. This bill was listed as a fruit platter costing Rs 442.50/- inclusive of Goods and Service Tax (GST). It can be shocking for anyone if he or she will be charged around Rs 442.50/- for just buying a couple of bananas. Rahul Bose then tweeted this on Twitter which then became a hot topic in India’s social networking sites. He tweeted, “You have to see this to believe it. Who said the fruit wasn’t harmful to your existence? Ask the wonderful folks at @JWMarriottChd #goingbananas #howtogetfitandgobroke #potassiumforkings.” This tweet spread like a wildfire by bringing more complications for JW Marriott thus calling this issue a Golden Banana issue.

People were tweeting that it was just a pair of bananas and some people were also engaged in calling out the hotel for cheating their customers. This issue made the Excise and Tax Department to voluntarily take this issue into consideration as it is clear cheat on innocent customers. There was also another set of people who tweeted that if you are paying thousands for a room what’s the problem in paying a thousand for fruits? Yes, it is more shocking when we hear this sort of comments from the consumers itself. 

Just after the tweet became viral the JW Marriott was stuck in a Gordian Knot of an investigation by the Union Territory of Excise and Taxation Department for charging a hefty sum for just a couple of bananas. An inquiry was conducted in JW Marriott Hotel on the levy of tax on fresh fruits and other items at the hotel and the hotel authorities were asked to submit the reply on the queries. It’s a food for thought why the hotel was charging exorbitant tax on a couple of bananas for the whole country. The Union Territory Excise and Taxation Department also seized the documents to check the day to day affairs of the JW Marriott in-toto and also whether they are regularly depositing the tax to the tax authorities or not.  

The Union Excise and Tax department were then busy in interpreting the taxability issue of this case and what penalty would be levied on the JW Marriott for going against the laws. Before going to what were the department views on this issue. Let’s discuss the tax implication on the sale of fresh fruits and vegetables. 

What’s the tax viewpoint in this case

The tax implications on fruits and vegetables have been a point of moot when the Goods and Service Tax, 2017 came into effect. The obscurity on this issue was clear when the Central Board vide its Notification No. 02/2017 Central Tax (Rate) dated 28.06.2017 clarified that GST is exempted for fresh fruits and vegetables that means no GST would be attracted on the supply of fresh fruits or vegetables. After this notification, the fresh fruits and vegetables were included under Section 11(1) of the CGST Act, 2017 which provides for the list of exempted supply of goods or services under the GST Act which is taxed at nil rates or exempted from taxability for the benefit of the general public. GST on fruits and vegetables varies from the range of zero per cent to 5 per cent, 12 per cent and 18% depending upon whether it underwent through the further procedure or not. For frozen fruits or vegetables whether uncooked or cooked by adding boiled water attracts GST at the rate of 5%.

For the sale of dry fruits fresh or dried a GST can be levied at the rate of 12%. Recently in 2019, the Central Board of Direct Taxes (CBIC) came up with another clarification in its 37th GST Council Meeting, wherein they clarified that GST shall be nil rated in dried tamarind and 18% on almond milk. Thus, it varies from the type of fruit or vegetable they are supplying. GST differs in this area if that fruit or vegetable has undergone through different procedures. A short reference of all taxes on fruits and vegetables processed and unprocessed are listed below for your quick reference.

Products	GST Rate
GST at the Nil rate
Fresh or chilled vegetables, roots and tubers like potatoes, tomatoes, onion, garlic, cabbage, cauliflower, carrot, beetroots etc. have been exempted from GST.	0%
Fresh fruits like coconut, apples, cherries, peaches, bananas, pineapples, guavas, mangoes, citrus fruits such as oranges, mandarins, grapefruit etc. have been exempted from GST.	0%
Fresh nuts such as Almonds, Hazelnuts or filberts, walnuts, Chestnuts, Pistachios, Macadamia nuts, Kola nuts, Areca nuts	0%
GST at rate of 5%
Jari booti and dry flowers like herbs, dry plants and roots, bark.	5%
Frozen vegetables and fruits whether uncooked or cooked by boiling in water or added sugar or sweeting matter.	5%
Provisionally preserved vegetables, fruits and nuts but unsuitable for immediate consumption in that condition.	5%
Other frozen or dried vegetables Dried areca nuts, whether shelled or peeled	5%
GST at the rate of 12%
Dry Fruits fresh or dried, shelled or peeled	12%
Fruits and vegetable juices	12%
GST at the rate of 18%
Fruits, vegetables, nuts and other plants preserved by vinegar or acetic acid or sugar Tomatoes, mushrooms or other vegetables preserved by other means Fruit jam, jellies, pastes or nut puree	18%

But fresh fruits and vegetables were exempted from GST as discussed above. About the above understanding, we can understand that even though the tax on fresh fruits and vegetables were exempt, yet JW Marriott tried to defraud its customers by charging taxes on a pair of bananas. After defrauding its customers let’s discuss what penalties did JW Marriott cough up after the investigation conducted by the UT Excise and Taxation Department in JW Marriott.

What were the consequences faced by JW Marriott for selling two bananas for Rs 442.50/-? 

As there is no separate provision which levies the penalty for the contravention of Section 11(1) of the CGST Act, 2017 the levy of penalty will be per the general penalty clause of the CGST Act, 2017. Section 125 of the CGST Act, 2017 provides that if any person contravenes any provision or rule of the GST and if there is no separate penalty for the contravention of the said provision then the person shall cough up the penalty of Rs 25000/- under Section 125 of the CGST Act 2017 which stipulates the General Penalty under the GST Act. For contravening Section 125 of the CGST Act, 2017, JW Marriott was penalised by a fine of Rs 25000/ for just serving two bananas at the rate of Rs 442.50/-.

Conclusion

This case can be an example for all the hotel industries who are overcharging their customers for the goods or services which they are not ought to do as per the legal standards. Today, the JW Marriott case has come into notice due to the tweet of actor Rahul Bose still there are many cases wherein the hotel industry is charging hefty sums for the goods or services which according to the law are not subject to be charged at such rates.

The government should make stringent norms and provisions for this industry as they are looting the people in the name of the taxes. Levy of Rs 25000/- for charging Rs 442.50/- is small in front of defrauding that this hotel industry plays. There should be an increase in the amount of penalty levied for using taxes as a means to cheat the customers. This can be eye-opening for the legislature of our country which can help them to take adequate measures to get rid of this type of crime by the hospitality sector. This banana issue may seem to be a small issue but has shaken the roots of Indian hospitality sector. Maybe there would be more banana cases in the future but it is on the customer how they deal with it. 

After this incident I strongly feel that there is a strong need of supervision in this sector which can bar these top 5 or 7 star hotels from overpricing their customers in the name of their brand and rest in the name of the taxes. Now the thrust is on customers as well to decide whether they want to be a part of folks who criticize such acts of the hospitality sector or wants to be part of those who think what’s the problem to pay for food when you are spending hard on your accommodation. There is a difference between paying high for food and paying high for unprocessed fruits, the customers should understand this difference now.

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skill.

LawSikho has created a telegram group for exchanging legal knowledge, referrals and various opportunities. You can click on this link and join: