SEZ Food Supply Not Zero-Rated

The Appellate Authority upheld the ruling that supplying food to employees in a Special Economic Zone (SEZ) area did not qualify as zero-rated supplies or restaurant services. The appellant's claim of operating a restaurant in the SEZ area was rejected, and the 5% GST rate was deemed inapplicable.

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Issues: Whether the supply of food by the appellant to employees of a unit located in a Special Economic Zone is a zero-rated supply under the integrated goods and services tax law, and whether the activity can be treated as restaurant services attracting the concessional rate.

Analysis: Zero-rated supply covers supply of goods or services to a Special Economic Zone developer or a Special Economic Zone unit. The supply in question was made to employees of the unit, who are neither the developer nor the unit itself, so the transaction could not be treated as zero-rated merely because the employees worked in the SEZ. The appellant was engaged as an outdoor caterer, cooking food at one place and distributing it to different client locations. On that basis, the activity did not answer the description of restaurant services, since a restaurant is a place where meals are prepared and served to customers. The applicable classification and rate therefore followed the service classification under the notification governing rate of tax.

Conclusion: The supply to employees of the SEZ unit is not zero-rated, and the appellant's activity is not restaurant services. The ruling against the appellant was sustained.

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