2020 (5) TMI 602 - AAR - GST

Association's Catering Services to Educational Institutions Exempt from CGST & SGST

The Authority ruled that catering services provided by the association to educational institutions are exempt from CGST and SGST. The services fell under ... Exemption under entry no.66 of Notification No.12/2017-Central Tax (Rate) - catering services to educational institutions - tax deduction at source under section 51 - applicability of TDS only to taxable suppliesExemption under entry no.66 of Notification No.12/2017-Central Tax (Rate) - catering services to educational institutions - The supply of catering services by the applicant to the residential schools falls within Entry No.66 of Notification No.12/2017-Central Tax (Rate) and is exempt from CGST and SGST. - HELD THAT: - The Authority examined the tender agreements and records and found that contracts were entered separately with the Heads of the respective residential schools, the food was required to be prepared within the school premises and supplied to the students of those schools, and the beneficiaries were in the primary school category. Given that Entry No.66 covers catering services to educational institutions (including mid-day meals schemes sponsored by Government) and the conditions of the contracts establish that the recipient is an educational institution and the service is provided to its students on the premises, the supply qualifies under Entry No.66 and is therefore exempt from central and state GST. [Paras 6, 7, 8]Supply of food and drinks by the applicant to the specified residential schools is covered by Entry No.66 and is exempt from CGST and SGST.Tax deduction at source under section 51 - applicability of TDS only to taxable supplies - TDS under section 51 of the CGST Act (and corresponding provision under the KGST Act) is not leviable on the amounts received for the exempted catering services. - HELD THAT: - Section 51(1) specifies deduction of tax at source from payment made to a supplier of taxable goods or services where the value under a contract exceeds the threshold. The Authority observed that the applicant's supplies have been held to be exempt under Entry No.66; consequently, such supplies are not 'taxable services' for the purpose of section 51. Therefore, the obligation to deduct tax at source under section 51 does not arise in respect of payments made to the applicant for those exempted services. [Paras 9, 10]Amounts received for the exempted catering services are not liable to deduction of tax at source under section 51 of the CGST Act and the corresponding provision of the KGST Act.Final Conclusion: The Authority ruled that the applicant's on-premises catering services to the specified residential schools fall within Entry No.66 of Notification No.12/2017 and are exempt from CGST and SGST, and accordingly no tax is required to be deducted at source under section 51 of the CGST Act (and the corresponding KGST provision) in respect of such exempt supplies. Issues:1. Whether catering services provided to educational institutions fall under exempted services and are not liable for tax deduction at source under GST.Analysis:Issue 1: Exempted Services and Tax Deduction at Source (TDS)The applicant, an association providing catering services to educational institutions, sought an advance ruling on whether their services, falling under HSN Code 9992, are exempt from TDS under GST. The applicant argued that as per Circular 65/39/2018, TDS is applicable only for taxable supply contracts, and since they provide exempted services to educational institutions sponsored by the government, TDS should not be applicable to them.Upon review, the Authority examined the relevant provisions of the CGST Act and the KGST Act, noting that the applicant's services were covered under entry no. 66 of Notification No. 12/2017-Central Tax (Rate), which exempts catering services to educational institutions. The Authority verified the contracts between the applicant and the recipient of services, confirming that the agreements were with the Heads of the Residential Schools, making the schools the recipients of the services.Further analysis revealed that the nature of the contract required the applicant to prepare food on the school premises for the students, indicating a catering service provided directly to primary school students. As per Section 51(1) of the CGST Act, TDS is applicable only to taxable services, and since the applicant's services were exempt, TDS provisions did not apply to payments made by educational institutions to the applicant.Conclusion:The Authority ruled that the catering services provided by the applicant to educational institutions fell under the exempted category as per the relevant notifications. Therefore, the services were exempt from CGST and SGST. Additionally, the amount received for such exempted services was deemed not liable for tax deduction at source under Section 51 of the CGST Act and the KGST Act.This comprehensive analysis of the judgment delves into the intricacies of the issues raised by the applicant and the Authority's findings, providing a detailed understanding of the legal implications and conclusions drawn in the case.