2018 (11) TMI 335 - AAAR - GST

Levy of GST - supply of food or drinks or any articles for human consumption - food supplied to SEZ area to employees of company - Zero rated supply or not - rate of GST - running a restaurant in the SEZ area - Held that - The supply made by the appellant to the employees of the unit located in SEZ cannot be construed as zero rated supply by any stretch of imagination, as the employees can neither be treated as SEZ developer nor as SEZ unit. Accordingly, GST will be applicable as per the classification of the services determined in terms of the scheme of the classification of services as provided under Annexure A to the N/N. 11/2017-C.T. (Rate) dated 28.06.2017 as amended by the N/N. 46/2017-C.T. (Rate) dated 14.11.2017. Running a restaurant in the SEZ area - rate of GST @ 5% or not - Held that - The food is being cooked at one place and being distributed to the various different locations of the companies with whom they have entered into contract. Thus, this event is not covered under the definition of the Restaurant services - the appellant claim that it is running Restaurant Services in the SEZ area is not tenable and hence the GST rate of 5% as envisaged by the appellant is not correct. Ruling - The services of supplying food by the appellant to the employees of the unit located in the Special Economic Zone is not covered under the zero rated supplies in terms of Section 16(1)(b) of the IGST Act, 2017 and the services of the appellant are also not in the nature of restaurant services as claimed by the appellant.

Summary

Issues:
1. Interpretation of activities as canteen services under GST.
2. Applicability of GST rates for supply and distribution of food.
3. Classification of services in SEZ area and determination of GST rates.

Analysis:

Issue 1: Interpretation of activities as canteen services under GST
The appeal was filed against an Advance Ruling that denied categorizing the appellant's activities as canteen services under GST. The appellant provided catering services to corporate offices under various contracts. The cases presented different scenarios based on contract terms. The Authority for Advance Ruling (AAR) decided against considering the activities as canteen services.

Issue 2: Applicability of GST rates for supply and distribution of food
The appellant raised questions regarding the GST rates applicable to supply and distribution of food in various scenarios. The AAR ruled negatively on the applicability of a lower GST rate for the activities. The appellant contested this ruling, specifically focusing on activities in a Special Economic Zone (SEZ) area.

Issue 3: Classification of services in SEZ area and determination of GST rates
The appellant sought clarification on the applicability of GST rates for services provided in an SEZ area. The AAR did not provide a clear ruling due to insufficient information. The appellant argued that their activities should be considered zero-rated supplies under Section 16(1)(b) of the IGST Act, 2017. However, the Appellate Authority found that the services did not qualify as zero-rated supplies or restaurant services, as claimed by the appellant.

In conclusion, the Appellate Authority upheld the ruling that the services of supplying food to employees in an SEZ area were not zero-rated supplies and did not qualify as restaurant services. The appellant's claim of running a restaurant in the SEZ area was deemed incorrect, and the GST rate of 5% was not applicable.