2024 (10) TMI 192 - AAR - GST

Composite supply of catering services with premises rental constitutes outdoor catering attracting 5% GST without input tax credit

AAR West Bengal ruled that composite supply of catering services within club premises along with renting of premises constitutes outdoor catering service. ... Composite supply - outdoor catering together with renting of premises - restriction on input tax credit where composite supply taxed at concessional rate - specified premises determined by declared tariff - treatment of bundled services under composite versus mixed supply ruleOutdoor catering together with renting of premises - composite supply - event-based and occasional nature - Composite supply of catering service within the club premises along with renting of premises falls within 'outdoor catering' together with renting of premises. - HELD THAT: - The Explanation to the rate Notification defines 'outdoor catering' as supply of food or drink at events that are event-based and occasional in nature. The applicant's supplies of food at event-based functions in the club qualify under that definition. The club's banquet provision involves naturally bundled elements (renting of premises and supply of food) which, when supplied in conjunction, have the essential character of outdoor catering together with renting of premises. The Authority relied on the ordinary meaning in the Explanation, the concept of 'naturally bundled' supplies as explained in the CBEC Education Guide, and factual finding that the services are event-based and occasional to hold that the supply is a composite supply covered by the entry for outdoor catering together with renting of premises. [Paras 4]Yes; the composite supply within the club premises qualifies as 'outdoor catering together with renting of premises'.Concessional rate for composite supply - restriction on input tax credit - Notification entry for outdoor catering together with renting of premises - The composite supply (outdoor catering together with renting of premises) is liable to GST at the concessional rate of 5% without input tax credit, subject to the prescribed condition on ITC and specified premises. - HELD THAT: - Entry No. 7(v) of the rate Notification provides a concessional rate for composite supply of outdoor catering together with renting of premises, conditional upon non availment of input tax credit and that the supply is provided at premises other than 'specified premises'. Applying that entry to the composite supply found above, the Authority ruled that GST is payable on the whole consideration at 5% and the restriction on taking input tax credit applies. The Authority expressly applied the condition that the concessional rate is subject to the supplier not being located in or providing services at 'specified premises'. [Paras 4]GST payable on the composite supply at 5% on the whole consideration without input tax credit, subject to the condition regarding specified premises and ITC restriction.Specified premises determined by declared tariff - seasonal/declared tariff governs classification - rate change when declared tariff exceeds threshold - Where the club's declared tariff for accommodation is Rs. 7,500 or above (i.e., the club is a 'specified premises') the composite supply attracts GST at 18% with input tax credit; when declared tariff is below that threshold the concessional 5% without ITC applies for the period the lower tariff is declared. - HELD THAT: - The Notification and its Explanation define 'specified premises' by declared tariff of accommodation. The Authority accepted the applicant's reliance on the CBIC clarification that the tariff declared for the season or period in which the service is provided governs classification. Consequently, the tax treatment depends on the declared tariff at the time of supply: when the declared tariff per unit per day is Rs. 7,500 or more the supply falls within the higher taxable category and attracts 18% with ITC; when the declared tariff is below Rs. 7,500 the concessional 5% without ITC applies for that period. [Paras 4]Concessional 5% without ITC applies when declared tariff is below Rs. 7,500; when declared tariff is Rs. 7,500 or above the supply is taxable at 18% with input tax credit for the period the higher tariff is declared.Final Conclusion: The Authority ruled that the club's banquet/banquet plus catering supplies are a composite supply falling within 'outdoor catering together with renting of premises' and are taxable at 5% on the whole consideration without input tax credit, unless the club is a 'specified premises' by virtue of a declared accommodation tariff of Rs. 7,500 or more, in which case the supplies attract 18% with input tax credit for the period the higher tariff is declared. Issues Involved:1. Classification of the composite supply of catering service within the club premises along with renting of premises as 'Outdoor Catering service along with Renting of Premise.'2. Applicable GST rate on the composite supply of catering service within the club premises along with renting of premises.3. Whether the club has the option to charge GST at different rates based on room tariff changes during peak seasons.Issue-wise Detailed Analysis:1. Classification of the Composite Supply:The primary issue is whether the composite supply of catering services within the club premises, along with renting of premises, can be classified as 'Outdoor Catering service along with Renting of Premise.' The applicant contends that the services provided are naturally bundled, comprising renting of premises and catering services, which are event-based and occasional in nature. According to the definition provided in Notification No. 20/2019-Central Tax (Rate), 'outdoor catering' includes supply of food or drinks at event-based functions. The Authority for Advance Ruling (AAR) agreed with the applicant, determining that such a supply qualifies as 'outdoor catering service together with renting of premises' when arranged at premises other than 'specified premises.'2. Applicable GST Rate:The applicant sought clarity on whether the composite supply should be taxed at 5% without Input Tax Credit (ITC) or at 18% with ITC. The AAR referred to the GST Council's recommendations and the relevant notifications, concluding that the composite supply of catering services along with renting of premises should attract GST at 5% without ITC, provided the room tariff does not exceed Rs. 7,500 per unit per day. This decision is contingent upon the services being provided at premises other than 'specified premises,' which are defined as those with a declared tariff above Rs. 7,500.3. Option to Charge Different GST Rates Based on Room Tariff:The applicant questioned whether they could opt to charge GST at 18% with ITC if the room tariff increased to Rs. 7,500 or above during peak seasons. The AAR clarified that if the room tariff is declared above Rs. 7,500 per unit per day, the premises would be considered 'specified premises,' and the GST rate applicable would be 18% with ITC. The ruling aligns with the CBIC Circular No. 27/01/2018-GST, which states that the applicable GST rate depends on the declared tariff at the time of service provision. Therefore, the club must adhere to the 5% GST rate without ITC when the tariff is below Rs. 7,500 and shift to 18% with ITC when the tariff exceeds this threshold.Ruling Summary:1. The composite supply of catering services within the club premises, along with renting of premises, is classified as 'Outdoor Catering service together with Renting of Premises' when not provided at 'specified premises.'2. The applicable GST rate for such composite supply is 5% without ITC, provided the room tariff does not exceed Rs. 7,500 per unit per day.3. If the room tariff exceeds Rs. 7,500, the supply is considered at 'specified premises,' and the GST rate applicable is 18% with ITC.