GST Classification: Food services by Merit Hospitality as outdoor catering, not canteen. SEZ supply verification pending.

The Authority determined that the services provided by Merit Hospitality, including the supply and distribution of food, do not qualify as canteen services but are classified as outdoor catering, taxable at 18% GST. The question regarding zero-rated supply to an SEZ area could not be definitively answered due to insufficient evidence provided by the applicant.

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Issues Involved:

1. Whether the supply of food by Merit Hospitality can be classified as canteen services and taxed at 5%.
2. Whether the combined supply and distribution of food can be classified as canteen services and taxed at 5%.
3. Whether the supply of food to an Employees Co-op. Society running a canteen can be classified as canteen services and taxed at 5%.
4. Whether the supply of food to employees in an SEZ area is exempt from GST or taxed at a different rate.

Issue-wise Detailed Analysis:

Case I: Classification of Supply of Food as Canteen Services

The applicant, Merit Hospitality, entered into a contract with 'A' Ltd. to supply food to its employees. The food is prepared at Merit Hospitality’s kitchen and delivered to 'A' Ltd.'s premises, where it is distributed by 'A' Ltd.'s staff. The menu, material specifications, and rates are pre-determined, and billing is done monthly.

The Authority examined whether this activity qualifies as canteen services taxable at 5% under Notification No. 11/2017-Central Tax (Rate). It was determined that the service provided does not meet the criteria for canteen services as defined, which typically involve on-premises preparation and serving. Instead, it was classified as outdoor catering, taxable at 18%.

Case II: Combined Supply and Distribution of Food

In this scenario, Merit Hospitality also undertakes the distribution of food, in addition to its supply, and raises a separate bill for the distribution service at 18% GST.

The Authority concluded that the additional distribution service does not change the nature of the primary service. Therefore, the combined activities still do not qualify as canteen services and remain classified as outdoor catering, taxable at 18%.

Case III: Supply of Food to Employees Co-op. Society

The contract for food supply is now with an Employees Co-op. Society running a canteen for 'A' Ltd.'s employees. The applicant questioned whether this changes the classification to canteen services.

The Authority noted that the change in contracting party does not alter the nature of the service provided. The supply of food to the Employees Co-op. Society is still considered outdoor catering, taxable at 18%.

Case IV: Supply of Food in SEZ Area

Merit Hospitality supplies food to employees of 'B' Ltd., located in an SEZ area, with payments made directly by the employees.

Question a: Exemption from GST for Supply to SEZ Area

The Authority examined Section 16(1) of the IGST Act and the SEZ Act, 2005. It was noted that zero-rated supply benefits apply only if the supply is to an SEZ developer or unit for authorized operations. The applicant did not provide sufficient evidence that the supply to 'B' Ltd. qualifies under these conditions. Therefore, the question could not be definitively answered.

Question b: Classification as Canteen Services in SEZ

The Authority reiterated that the service provided does not qualify as canteen services, even in an SEZ area. It remains classified as outdoor catering, taxable at 18%.

Question c: Classification as Restaurant Services in SEZ

Similarly, the service does not qualify as restaurant services. It remains classified as outdoor catering, taxable at 18%.

Order:

The Authority concluded that the services provided by Merit Hospitality in all cases do not qualify as canteen services and are instead classified as outdoor catering, taxable at 18% GST. The specific question regarding zero-rated supply to SEZ could not be answered due to insufficient information.

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