AAR rules catering services at client premises qualify for 5% GST under composite supply provisions after July 2018 amendments

The Gujarat AAR ruled on GST taxability for hospitality services involving canteen operations. The applicant provided catering services at client premises under contractual arrangements. For the period up to 25.07.2018, services were classified as outdoor catering under Sr. No. 7(v), attracting 18% GST. From 26.07.2018 onwards, following notification amendments, the same services were reclassified under Sr. No. 7(i) as composite supply of food and drinks to institutions on contractual basis, reducing the applicable GST rate to 5%.

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Issues Involved:
1. Classification of the services provided by the applicant as either supply of goods or supply of services.
2. Determination of applicable GST rate on the services provided by the applicant up to 25.07.2018.
3. Determination of applicable GST rate on the services provided by the applicant w.e.f. 26.07.2018.

Detailed Analysis:

1. Classification of Services:
The applicant, engaged in supplying food, snacks, and beverages as per an agreement with their client, sought clarification on the applicable tax rate. The primary issue was whether the activity carried out is considered a supply of goods or services. According to Section 7 of the CGST Act, 2017, and Entry 6 of Schedule II, the supply of food as part of any service is treated as a supply of services. The Commissionerate opined that the applicant's activity falls under "supply of services," specifically under Chapter Heading 996333, which pertains to food and beverage serving services in canteens and similar establishments, attracting an 18% GST rate.

2. Taxability up to 25.07.2018:
- Relevant Notifications and Circulars:
- Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 and Notification No. 11/2017-State Tax (Rate) dated 30.06.2017 provided different rates for various services under Heading 9963.
- Circular No. 28/02/2018-GST dated 08.1.2018 clarified that supply of food by a mess or canteen is taxable at 5% without Input Tax Credit.
- Nature of Service:
- The agreement indicated that the applicant was engaged to run a canteen for the client's employees, with fixed rates for meals, snacks, and tea. The service provided by the applicant was classified as "outdoor catering service" since it was provided at the client's premises, not the applicant's.
- The Allahabad High Court in Indian Coffee Workers’ Co-Op. Society Ltd. Vs. CCE & ST, Allahabad held that catering services provided at a place other than the caterer's own premises qualify as "outdoor catering."
- Conclusion:
- Up to 25.07.2018, the services provided by the applicant were classified under "Outdoor Catering Services" and covered under Sr. No. 7(v) of Notification No. 11/2017-Central Tax (Rate), attracting an 18% GST rate (CGST: 9% + SGST: 9%).

3. Taxability w.e.f. 26.07.2018:
- Amendments and Clarifications:
- Notification No. 13/2018-Central Tax (Rate) dated 26.07.2018 amended Notification No. 11/2017-Central Tax (Rate) to include an explanation clarifying that supply at a canteen, mess, cafeteria, or dining space of an institution (such as a school, college, hospital, industrial unit, office) based on a contractual arrangement is taxable at 5%, provided it is not event-based or occasional.
- This amendment rationalized the GST rate for such supplies to 5%, distinguishing it from event-based outdoor catering.
- Conclusion:
- W.e.f. 26.07.2018, the services provided by the applicant were classified under "Accommodation, food, and beverages services" and covered under Sr. No. 7(i) of Notification No. 11/2017-Central Tax (Rate), attracting a 5% GST rate (CGST: 2.5% + SGST: 2.5%).

Ruling:
- Up to 25.07.2018: The services provided by the applicant were classified under Sr. No. 7(v) of Notification No. 11/2017-Central Tax (Rate), attracting an 18% GST rate.
- W.e.f. 26.07.2018: The services provided by the applicant were classified under Sr. No. 7(i) of Notification No. 11/2017-Central Tax (Rate), attracting a 5% GST rate.

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