2018 (9) TMI 1335 - AAR - GST

Catering services at customer premises qualify for reduced GST rates from July 2018 under specific conditions

AAR Tamil Nadu ruled on GST classification for catering services supplied at customer premises. The applicant managed canteen facilities at industrial ... Catering Service - Applicant is engaged in supplying food and beverages at the canteen of their customers - Whether the supply of the applicant falls under 7(i) of Notification No. 11/2017 dated 28.06.2017 or under 7(v) of the said Notification? - Applicability of Notification No. 46/2017-C.T. (Rate) dated 14th November 2017. Held that:- From the contracts furnished, it is seen that the Applicant supplies the food in the place of business of the Service Recipient. The charges are received from the companies monthly basis on the coupons collected. In short, it is deciphered that the Applicant is vested with management of the canteen facilities. The Applicant himself does not get paid for by the consumers of the food and beverages. The Recipient of the services are the companies who enter into contract with the applicant. Supply of food is classified under 9963. It is clear that the instant case of the applicant is making supply of services in the dining space of the industrial units and offices which is squarely covered in the Explanation 1 to Sl.No 7(i) and SI.No 7(v) now only covers supply at functions which are occasional and event based. The supply of food to institutions which were earlier covered under entry at Sl.No. 7(v) has been included under Sl.No. 7(i) of the Notification No. 11/2017-CT (Rate) with effect from 27th July 2018 and thereupon is liable to tax at the rate of 5% subject to the condition that credit of input tax charged on goods and services used in supplying the services are has not been taken read with Explanation (iv) of said Notifications. Ruling:- The services of the applicant of supplying food and beverages on the premises of industrial unit/office, which are on the terms of the contract with M/s. Kone Elevators and such other contracts, are liable to tax at the rate of 9% CGST under SI.No. 7(v) of Notification No. 11/2017 -C.T. (Rate) dated 28.06.2017 and 9% SGST under Sl.No. 7(v) of G.O.(Ms) No 72 dated 29.06.2017 No. II(2)/CTR/532(d-14)/2017 for the period upto 26.07.2018 and from 27.07.2018 onwards at the rate of 2.5% CGST under SI.No. 7(i) of the Notification No. 11/2017-C.T. (Rate) as amended and at the rate of 2.5% SGST under SI.No. 7(i) of G.O.(Ms) No 72 dated 29.06.2017 No.II(2)/CTR/532(d-14)/2017 as amended subject to the condition that credit of input tax charged on goods and services used in supplying the services are has not been taken read with Explanation (iv) of said Notifications. Issues Involved:1. Applicable GST rate for catering services provided by the applicant.2. Classification of the applicant’s services under the relevant GST notifications.3. Impact of amendments to GST notifications on the applicant's services.Issue-wise Detailed Analysis:1. Applicable GST rate for catering services provided by the applicant:The applicant, an industrial caterer, sought an advance ruling on the applicable GST rate for their catering services. Initially, the applicant assumed a GST rate of 5% based on their interpretation of Notification 11/2017-CT(R) dated 28/06/2017. However, upon further examination, it was determined that the services provided by the applicant fell under the category of 'outdoor catering,' which is subject to an 18% GST rate (9% CGST and 9% SGST) as per Sl.No. 7(v) of Notification No. 11/2017-CT(R) dated 28.06.2017.2. Classification of the applicant’s services under the relevant GST notifications:The applicant’s services involve preparing and supplying food to employees of various companies at the companies' premises. The companies provide rent-free space and other amenities necessary for the catering services. The applicant argued that their services should be classified under Sl.No. 7(i) of Notification No. 11/2017-CT(R), which pertains to services provided by restaurants, eating joints, messes, or canteens without air-conditioning or licenses to serve alcohol. However, the ruling determined that the applicant’s services are more appropriately classified under Sl.No. 7(v) of the same notification, which covers outdoor catering services.3. Impact of amendments to GST notifications on the applicant's services:The GST Council, in its 23rd meeting held on 10th November 2017, discussed the tax rates for various categories of food supply services. It was decided that standalone restaurants would be taxed at 5% without input tax credit, while outdoor catering would attract an 18% tax rate with input tax credit. This distinction was maintained in Notification No. 46/2017 dated 14th November 2017. However, in the 27th GST Council meeting held on 4th May 2018, it was decided to rationalize the GST rate for composite supply of food and drinks in institutions such as schools, colleges, hospitals, industrial units, and offices to 5%, provided the supply is not event-based or occasional. Consequently, Notification No. 13/2018 dated 26th July 2018 amended Notification No. 11/2017-CT(R) to reflect this change. From 27th July 2018 onwards, the applicant’s services were classified under Sl.No. 7(i) of the amended notification, attracting a 5% GST rate (2.5% CGST and 2.5% SGST) without input tax credit.Ruling:The services of the applicant of supplying food and beverages on the premises of industrial units or offices, based on contracts such as the one with M/s. Kone Elevators, are liable to tax at the rate of 9% CGST under Sl.No. 7(v) of Notification No. 11/2017-CT(R) dated 28.06.2017 and 9% SGST under the corresponding state notification for the period up to 26.07.2018. From 27.07.2018 onwards, these services are liable to tax at the rate of 2.5% CGST under Sl.No. 7(i) of the amended Notification No. 11/2017-CT(R) and 2.5% SGST under the corresponding state notification, subject to the condition that input tax credit on goods and services used in supplying the services has not been taken.