Food delivery and corporate catering classification as composite service taxed at 18% and eligible for input tax credit.

The applicant's bundled food preparation, quality assurance, pickup, transportation and delivery constitutes a composite supply treated as a supply of service under Schedule II, with the principal supply being contract food services classified under SAC 996337 and attracting GST at 18% (9% CGST + 9% SGST); the applicant cannot charge GST by reference to the category of inward goods. The applicant's inward supplies, though ordinarily blocked for food and beverages, fall within the proviso permitting input tax credit when used to make an outward taxable composite supply of the same category, and therefore ITC is allowable on those inward supplies.

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Issues: (i) Whether the applicant's activity of procuring and delivering food to corporate clients is a supply of goods subject to charging GST according to the category of inward goods supplied, or a supply of service and therefore taxable under the applicable service entry; (ii) Whether the applicant is eligible to claim Input Tax Credit (ITC) on inward supplies used in that activity.

Issue (i): Whether the applicant's activity constitutes supply of goods or supply of service and the correct tax classification and rate to be applied.

Analysis: The activity involves preparation coordination, quality assurance, pick-up, transportation and delivery of cooked food pursuant to contracts with clients; such elements are naturally bundled. Para 6(b) of Schedule II treats supply of food as part of a service as a composite supply. Section 2(30) defines composite supply with a principal supply. The Annexure to Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 classifies contract food services under SAC 996337 and the residual entry at Sl. No. 7(vi) covers accommodation, food and beverage services not falling under earlier sub-entries and attracts 18% GST.

Conclusion: The activity is a composite supply treated as a supply of service and is taxable under SAC 996337, attracting GST at 18% (9% CGST and 9% SGST) under Sl. No. 7(vi) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. The applicant cannot charge GST based on the category of inward goods.

Issue (ii): Whether the applicant can claim Input Tax Credit on inward supplies used in the activity.

Analysis: Section 17(5)(b) blocks ITC on food and beverages generally, but contains a proviso permitting ITC where the inward supply is used to make an outward taxable supply of the same category or as an element of a taxable composite or mixed supply. The applicant's inward supplies are used in making an outward composite supply of food and services in the same line of business.

Conclusion: The applicant is eligible to avail Input Tax Credit on the inward supplies used for making the outward composite supply as covered by the proviso to Section 17(5)(b) of the CGST Act, 2017.

Final Conclusion: The advance ruling holds that the applicant's activity is a taxable supply of service (composite supply) taxed at 18% and that the applicant may claim ITC on inward supplies used in making that outward composite supply.

Ratio Decidendi: A supply comprising bundled preparation, quality control, logistics and delivery of food pursuant to contractual arrangements is a composite supply treated as a supply of service under Schedule II(6)(b) of the CGST Act, 2017 and falls under SAC 996337 and residual tariff entry attracting 18%; ITC is available under the proviso to Section 17(5)(b) where the inward supply is used in making an outward composite supply of the same category.

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