2019 (8) TMI 33 - AAAR - GST

Appellate authority clarifies tax rate on food at members' club social events under GST Act

In Re: M/s. The Bengal Rowing Club

The appellate authority modified the ruling of the WBAAR regarding the classification and rate of tax on services provided by a members' club. It ... Classification of supply - rate of tax - food supplied at social gatherings - HELD THAT:- Under the provisions of serial no. 7(v) of the Rate Notification it is seen that any supply of food or beverage at any event, whether or not served at an outdoor or an indoor function, squarely falls under the said category. A social get-together held at the Club premises as explained by the Appellant, is “an event or a function” of occasional nature. An “event” is a planned public or social occasion whereas, a “function” means an official ceremony or a formal social event, such as a party or a special meal, at which a lot of people are usually present - The provisions of serial no.7(v) of the Rate Notification is not restricted to Exhibition Halls or Marriage Hails and includes all indoor and outdoor functions. The services provided by the Club at these social get-togethers are not regular restaurant services as envisaged from the submissions made by the Appellant. So. the supplied at events which are occasional in nature like the social get-togethers arranged at the Club premises will unambiguously fall under serial no. 7(v) the Rate Notification. The supply of food at events organised by the Appellant in the club premises is taxable under serial no. 7(v) of the Notification no. 11/2017-C.T (Rate) dated 28-06-2017 under the Central Goods and Services Tax Act. 2017 & Notification No. 1135-FT dated 28-06-2017 under the West Bengal Goods and Services Tax Act, 2017 and taxed @ 18%. Issues Involved:1. Classification and rate of tax on various services provided by the Appellant.2. Admissible proportion of input tax credit for services other than the supply of food.3. Applicability of taxation on a members' club under the GST Act.Detailed Analysis:1. Classification and Rate of Tax on Various Services Provided by the Appellant:The Appellant, The Bengal Rowing Club, sought an advance ruling on the classification and rate of tax on various services it provides, including the supply of food from the restaurant, other restaurant services, supply of food at events, and other ancillary services.The WBAAR classified the services into two categories:- Supply of food as part of services at the restaurant or social events.- Other services to members and guests not bundled with the supply of food.The WBAAR ruled:- Supply of food from the restaurant is classifiable under SAC 9963 and taxable under Sl. No. 7(i) or 7(iii) of the Rate Notification.- Food supplied at social events is classifiable under SAC 9963 and taxable under Sl. No. 7(vii) of the Rate Notification.- Other services are classifiable under SAC 9995 and taxable under Sl. No. 33 of the Rate Notification.The Appellant contested this classification, arguing that food supplied for social gatherings should not be categorized as composite services taxable at 18%, as separate bills are raised for food and beverages. They also highlighted that all restaurant services should be taxed at 5% with no input tax credit, as per the Rate Notification.2. Admissible Proportion of Input Tax Credit for Services Other Than the Supply of Food:The WBAAR's ruling included that the provisions under sub-section 2 and sub-section 16 of section 17 of the GST Act, read with Rules 42 and 43 of the GST Rules, are applicable for the reversal of input tax credit. Supplies taxable under Sl. No. 7(i) of the Rate Notification are to be treated as exempt supplies for this purpose.3. Applicability of Taxation on a Members' Club Under the GST Act:The Appellant argued that as a members' club, it operates on the principle of mutuality, where there is no profit motive, and any surplus is not distributed as profit. They cited a Calcutta High Court order which held that the club was not liable to pay service tax under the Finance Act, 1994, based on the principle of mutuality.However, the Respondent countered that the club charges annual subscriptions and additional fees for services, which fall under the definition of supply under the GST Act.Judgment:The appellate authority examined the submissions and found that the WBAAR's ruling was restricted to the rate of tax on food supplied at social gatherings. The authority clarified that the issue of taxation on a members' club under the GST Act was not discussed.The appellate authority noted discrepancies in the Appellant's submissions regarding the nature of services provided at social events. It was clarified that if no rental or ancillary charges are included in the price of food and beverages served at social events, it would not fall under serial no. 7(vii) of the Rate Notification.The authority concluded that:- Food supplied at social events organized by the Appellant in the club premises is taxable under serial no. 7(v) of the Rate Notification at 18%.- The ruling of the WBAAR was modified to reflect this classification.The appeal was disposed of accordingly, and copies of the order were sent to both the Appellant and the Respondent.