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 ... Classification of catering services - outdoor catering - restaurant supply - supply of food and beverages on premises of service recipient - applicability of Notification No. 46/2017-C.T. (Rate) - inclusion of institutional canteens within restaurant entry by Explanation 1 - input tax creditClassification of catering services - outdoor catering - supply of food and beverages on premises of service recipient - Tax treatment of the applicant's supply for the period up to 26.07.2018 - HELD THAT: - The applicant prepared and served food on the premises of client companies, collected coupons on behalf of the client and was remunerated by the client monthly; consumers did not pay the applicant directly. The GST Council's deliberations and Notification No. 46/2017 reflect that supplies made on the premises of the service recipient and managed as part of the recipient's canteen arrangements fall within the description of outdoor catering as understood prior to the amendment. The Council distinguished standalone restaurants (eligible for a lower rate) from outdoor caterers and retained higher rate treatment for outdoor catering. Applying that classification to the contractual facts, the Authority holds that the applicant's supplies up to 26.07.2018 fall under Sl. No. 7(v) (outdoor catering) and attract the rates prescribed thereunder.For the period upto 26.07.2018 the applicant's supplies are covered by Sl. No. 7(v) and liable to tax at 9% CGST and 9% SGST.Inclusion of institutional canteens within restaurant entry by Explanation 1 - applicability of Notification No. 46/2017-C.T. (Rate) - input tax credit - Tax treatment of the applicant's supply from 27.07.2018 onwards after amendment by Notification No. 13/2018 - HELD THAT: - Notification No. 13/2018 (effective 27.07.2018) amended the entries so that supplies at a canteen, mess, cafeteria or dining space of an institution by the institution or by any other person under contract are included within Sl. No. 7(i). The legislative intent recorded in GST Council minutes was to restrict Sl. No. 7(v) to event-based/occasional outdoor catering and to bring institutional contractual supplies within the lower-rated restaurant category. Consequently, identical contractual arrangements as that of the applicant fall within Sl. No. 7(i) post-amendment, subject to the statutory condition that input tax credit on goods and services used in supplying the service has not been taken, as provided in the Explanation to the entry.From 27.07.2018 onwards the applicant's supplies are covered by Sl. No. 7(i) and liable to tax at 2.5% CGST and 2.5% SGST (subject to the condition that input tax credit has not been taken).Final Conclusion: The Authority rules that the applicant's contractual canteen services are taxable as outdoor catering under Sl. No. 7(v) for the period upto 26.07.2018 (9% CGST + 9% SGST) and, following the 27.07.2018 amendment, are taxable under Sl. No. 7(i) as institutional canteen supplies at the concessional rate (2.5% CGST + 2.5% SGST) subject to the condition regarding non-availability of input tax credit. 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.