GST exemption on mess services provided in government operated hostels

[Aditya Khandelwal]

Dear All,

Is there any exemption on mess services provided on contract basis to government operated hostels for socially backward class of people?. These hostels are usually located at district places for backward class people pursuing education or doing jobs. These facilities are provided free of cost/concessional rate to such people by various Departments of Central or State govt responsible for upliftment of socially backward community. (Hostels are not run by any educational body)

I thought of fitting it into entry no. 3 of Notification no 12/2017- Central Tax (Rate). But it covers only Pure services. Whereas, subjected mess services would be treated as composite supply.

Request your expert opinion on the issue.

[Amit Agrawal]

Its neither a pure service nor a 'Composite supply of goods and services in which the value of supply of goods constitutes not more than 25 per cent. of the value of the said composite supply' nor the supply-recipient is an educational institution.

In given circumstance, exemption under Serial No. 3, 3A & 66 (b) (ii) of Notification No. 12/2017- Central Tax (Rate) (as amended till date) will not be available.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Ravinesh Sinha]

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 (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration is Service as per 6(b) of schedule II

Hence mess service is Composite supply of service as it involves food for human consumption and catering both. So it can be classified as pure service.

[Amit Agrawal]

Exemption under Serial No. 3 of Notification No. 12/2017- Central Tax (Rate) (as amended till date) is for following 'Description of Services':

"Pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union territory or local authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution."

Hence, subject activities (i.e. mess service), even though falling under category of 'supply of services' only as per Clause 6 (b) of Schedule II under CGST Act, 2017, same are not 'pure service' for purpose of claiming exemption under Serial No. 3 of Notification No. 12/2017- Central Tax (Rate) (as amended till date).

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Ravinesh Sinha]

This means pure service does not include composite supply .

[Shilpi Jain]

Yes. Pure services will not include composite supplies.

[Aditya Khandelwal]

Dear Amitji,Ravineshji and Shilpiji,

Thanks for the response.

[KASTURI SETHI]

Dear Querist,

In order to understand the concept of pure services/pure agent services go through C.B.E. & C. Flyer No. 26, dated 1-1-2018

AI Summary

Pure service classification affects GST exemption for contracted mess services to government hostels serving backward communities. Mess services for government operated hostels involve supply of food treated as a service under Schedule II and, when combined with catering, may be a composite supply; a pure service exemption excludes composite supplies, so the stated exemption entries will not apply to such mess services as described.