Rate of Tax

[THYAGARAJAN KALYANASUNDARAM]

Dear Experts,

One of my clients who is having a hall and giving free of cost but charging only for the food supply for any function. He charges the GST tax only on food @ 5% and no seperate consideration received for hall.

Another client runs the hotel and provides breakfast for a complement which is included in the room rent. He charges the GST tax only on the Room rent @ 12% but no separate consideration is received for food and drinks.

Please let me know whether this procedure is correct with the rate of tax or something else.

Please advise me on this.

Thanks in Advance.

[Shilpi Jain]

Both of these are composite supplies and the rate of tax applicable to the principal supply has to be charged.

In the first case the GST applicable on outdoor catering will be applicable since it is renting of hall with food supply for events/occasions. GST rate could be 5% or 18% as per rate notification.

The second one would be taxable at the rate applicable to the room rent.

[KASTURI SETHI]

Both situations conform to the definition of Composite Supply under Section 8 (a) of CGST Act, 2017.

AI Summary

Composite supply principle: tax follows the principal supply, e.g., catering for event venues and room rent with breakfast. Composite supply rules require that bundled transactions where one element is not separately paid for be taxed at the rate applicable to the principal supply. A hall provided with food for events is treated as a composite supply and taxed at the catering principal-supply rate; accommodation including complimentary breakfast is treated as a composite supply and taxed at the room-rent principal-supply rate.