Cooperative society canteen services split into manpower supply at 18% GST and restaurant services at 5% GST rates

The AAR Rajasthan ruled on classification of services provided by a cooperative society operating a canteen at NTPC premises. The authority held that manpower services for canteen operation constitute "Temporary staffing services" under HSN 998514, attracting 18% GST, not restaurant or outdoor catering services. However, direct food sales to employees at the canteen qualify as "Restaurant Service" under HSN 9963, subject to 5% GST provided no input tax credit is claimed. The ruling clarified that fixed payments from NTPC for canteen maintenance are taxable as manpower supply services at 18%.

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Issues Involved:
1. Classification of the service provided by the applicant.
2. Applicable rate of tax on consideration received from NTPC.
3. Applicable rate of tax on consideration received from the sale of food items to employees/workers/others.
4. Clarification on the correct nature of service and applicable rate of tax if the above questions are not answered affirmatively.

Detailed Analysis:

Issue 1: Classification of the Service Provided by the Applicant
- Applicant's Submission: The applicant, M/s Indian Coffee Workers' Cooperative Society Limited, provides plant canteen services at NTPC Anta, supplying food to NTPC employees. They argue that their services fall under "Restaurant Service" as per Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017, attracting GST @ 5%.
- Authority's Analysis: The applicant's service involves supplying manpower for running and maintaining the canteen, which includes managing staff like managers, cooks, and cleaners. This service is classified under "Temporary staffing services" (HSN 998514) as it involves supplying personnel for temporary work assignments.
- Conclusion: The service provided by the applicant is classified as "Temporary staffing services" under heading No. 998514 and attracts GST @ 18% (9% CGST + 9% SGST).

Issue 2: Applicable Rate of Tax on Consideration Received from NTPC
- Applicant's Submission: The applicant contends that the applicable tax rate should be 5% (2.5% CGST and 2.5% SGST) based on their classification under "Restaurant Service."
- Authority's Analysis: Given that the service is classified under "Temporary staffing services," the applicable tax rate is determined by Notification No. 11/2017-CT (Rate) dated 28.06.2017, which states an 18% GST rate for such services.
- Conclusion: The applicable tax rate for the service provided to NTPC is 18% (9% CGST + 9% SGST).

Issue 3: Applicable Rate of Tax on Consideration Received from Sale of Food Items
- Applicant's Submission: The applicant believes the rate of tax should be 5% (2.5% CGST and 2.5% SGST) for the sale of food items to employees/workers.
- Authority's Analysis: The sale of food items to employees/workers at pre-decided rates falls under "Restaurant Service" as defined in Notification No. 11/2017-CT (Rate) dated 28.06.2017. This service is classified under HSN 9963 and attracts GST @ 5%.
- Conclusion: The rate of tax applicable for the sale of food items to employees/workers is 5% (2.5% CGST + 2.5% SGST).

Issue 4: Clarification on Correct Nature of Service and Applicable Rate of Tax
- Applicant's Request: If the above questions are not answered affirmatively, the applicant seeks clarification on the correct nature of service and applicable rate of tax.
- Authority's Conclusion:
- The service of supplying staff to NTPC is classified as "Temporary staffing services" under Heading No. 998514 and attracts GST @ 18%.
- The sale of food items to employees/workers is classified under "Restaurant Service" and attracts GST @ 5%.

Ruling:
1. Classification of Service: The service provided by the applicant is classified as "Temporary staffing services" under heading No. 998514, attracting GST @ 18%.
2. Rate of Tax on Consideration from NTPC: The applicable rate of tax is 18% (9% CGST + 9% SGST).
3. Rate of Tax on Sale of Food Items: The applicable rate of tax is 5% (2.5% CGST + 2.5% SGST).
4. Clarification on Service Nature and Tax Rate: As per the above conclusions, the services are classified and taxed accordingly.

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