composition scheme

[SHARAD ANADA]

Is outdoor catering service covered under Sch II 6(b) and eligible for Composition scheme U/s. 10?

[Rajagopalan Ranganathan]

Sir,

You are eligible to pay gst under Composition Scheme under Section 10 of CGST Act, 2017. The rate was 2.5% CGST and 2.5% SGST. However this scheme has become redundant since the general rate of tax on supply of food itself is 2.5% CGST and 2.5% SGST without input tax.

[KASTURI SETHI]

Schedule II 6(b) talks of Composite Supply and not of Composition Scheme (Section 10). Both have different legal aspects and contents. Cannot be correlated.

[SHARAD ANADA]

Sir

Pl refer Sec.10

10. (1) Notwithstanding anything to the contrary contained in this Act but subject to the provisions of sub-sections (3) and (4) of section 9, a registered person, whose aggregate turnover in the preceding financial year did not exceed fifty lakh rupees, may opt to pay, in lieu of the tax payable by him, an amount calculated at such rate as may be prescribed, but not exceeding,––

(a) one per cent. of the turnover in State or turnover in Union territory in case of a manufacturer,

(b) two and a half per cent. of the turnover in State or turnover in Union territory in case of persons engaged in making supplies referred to in clause (b) of paragraph 6of Schedule II, and

(c) half per cent. of the turnover in State or turnover in Union territory in case of other suppliers, subject to such conditions and restrictions as may be prescribed:

Sch. II 6(b)

6. Composite supply

The following composite supplies shall be treated as a supply of services, namely:-

(a) works contract as defined in clause (119) of section 2; and

(b) supply, by way of or as part of any service or in any other manner whatsoever,of goods, being food or any other article for human consumption or any drink (otherthan alcoholic liquor for human consumption), where such supply or service is forcash, deferred payment or other valuable consideration.

My query is whether Sch. II 6(b)) covers outdoor catering services and can he avail composition scheme.

[KASTURI SETHI]

In my view, outdoor catering is covered under Schedule II 6(b) and eligible for composition scheme under Section 10 of CGST Act. To have more clarity on the issue, we must know the difference between outdoor catering and indoor catering (restaurant). If we go through observations of the Supreme Court in the case of Tamil Nadu Kalyana Mandapam Association Vs. UOI reported as (2006) 4/STT.308 =  2004 (4) TMI 1 - SUPREME COURT OF INDIA regarding the clear-cut difference between the two, it becomes amply clear that the language of Schedule II 6(b) (highlighted by you), stands for outdoor catering.

[KASTURI SETHI]

If we look back into pre-GST era, the definition of 'Outdoor Catering' is almost same.We can 95% same.

AI Summary

Composition scheme eligibility for outdoor catering depends on treating food supply as a composite service under Schedule II. Whether outdoor catering falls within Schedule II paragraph 6(b) and thus qualifies for the composition scheme under Section 10 is addressed. Section 10 allows eligible small taxpayers to pay tax at prescribed concessional rates; Schedule II(6)(b) treats supply of food or drink supplied as part of a service as a service. Commentators note the legal distinction between composite supply and the statutory composition scheme, but conclude outdoor catering is covered by Schedule II(6)(b), subject to turnover and scheme conditions.