2020 (4) TMI 595 - AAR - GST

Taxability - rate of tax - supply of services - Hospitality Services - business of supplying foods, snacks, beverages etc. to the consumers/clients as per agreement with them - taxability of subject supply of services up to 25.07.2018 and w.e.f. 26.07.2018, due to amendments in subject Notifications - N/N. 11/2017-Central Tax (Rate) dated 28.06.2017. TAXABILTY UP TO 25.07.2018 - outdoor catering services or not - HELD THAT - The service recipient has engaged the applicant for running of the canteen for their workers / employees. The rates for the meal, snacks, tea have been fixed and payable by the recipient. The menu is required to be decided by the canteen committee of the recipient. It is, therefore, evident that the applicant, who is caterer, is providing service from other than his own premises to the recipient. Therefore, the nature of service provided by the applicant is that of outdoor catering service - From the nature of service provided by the applicant, as is evident from the copy of agreement, it is clear that it is not in the nature of service provided by a restaurant, eating joint including mess, canteen. Therefore, the clarification issued, vide Circular No. 28/02/2018-GST dated 08.1.2018, is not applicable. In the present case also, services in connection with catering are provided by the applicant at a place other than a place of the applicant. Further, the service of catering is provided by the applicant to the recipient and the fact that the meal, snacks, tea etc. are consumed by the workers/employees of the recipient, would not alter the nature of service provided by the applicant - up to 25.07.2018, the said supply of services of the applicant is taxable under Accommodation, food and beverages services as a part of Outdoor Catering Services and is covered under Sr. No. 7(v) of the Table to the Notification No. 11/2017Central Tax (Rate) dated 28.06.2017, as amended up to 25.07.2018, issued under the Central Goods and Services Tax Act, 2017 and Notification No. 11/2017-State Tax (Rate) dated 30.06.2017, as amended up to 25.07.2018, issued under the Gujarat Goods Services Tax Act, 2017, attracting GST @ 18%. TAXABILTY W.E.F. 26.07.2018 - HELD THAT - The Explanation 1 inserted at column (3) at Sl. No. 7 (i) of the Table to Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, the entry relating to composite supply of food and drinks in restaurant, mess, canteen eating joints and such supplies to institutions (Educational, office, factory, hospital) on contractual basis is rationalize at GST rate of 5% and made it clear that the scope of outdoor catering under 7(v) is restricted to supplies in case of outdoor/indoor functions that are event based and occasional in nature. After amendment of Notification No.11/2017-Central Tax (Rate) dated 28.06.2017, made vide Notification No.13/2018Central Tax (Rate) dated 26.07.2018), the said supply of services of the applicant is taxable under the category of Accommodation, food and beverages services and is covered under Sr. No. 7 (i) of the Table to Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, as amended, issued under the Central Goods and Services Tax Act, 2017 and Notification No. 11/2017-State Tax (Rate) dated 30.06.2017, as amended, issued under the Gujarat Goods and Services Tax Act, 2017, attracting GST @ 5%.

Summary

Issues Involved:
1. Classification of the services provided by the applicant as either supply of goods or supply of services.
2. Determination of applicable GST rate on the services provided by the applicant up to 25.07.2018.
3. Determination of applicable GST rate on the services provided by the applicant w.e.f. 26.07.2018.

Detailed Analysis:

1. Classification of Services:
The applicant, engaged in supplying food, snacks, and beverages as per an agreement with their client, sought clarification on the applicable tax rate. The primary issue was whether the activity carried out is considered a supply of goods or services. According to Section 7 of the CGST Act, 2017, and Entry 6 of Schedule II, the supply of food as part of any service is treated as a supply of services. The Commissionerate opined that the applicant's activity falls under "supply of services," specifically under Chapter Heading 996333, which pertains to food and beverage serving services in canteens and similar establishments, attracting an 18% GST rate.

2. Taxability up to 25.07.2018:
- Relevant Notifications and Circulars:
- Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 and Notification No. 11/2017-State Tax (Rate) dated 30.06.2017 provided different rates for various services under Heading 9963.
- Circular No. 28/02/2018-GST dated 08.1.2018 clarified that supply of food by a mess or canteen is taxable at 5% without Input Tax Credit.
- Nature of Service:
- The agreement indicated that the applicant was engaged to run a canteen for the client's employees, with fixed rates for meals, snacks, and tea. The service provided by the applicant was classified as "outdoor catering service" since it was provided at the client's premises, not the applicant's.
- The Allahabad High Court in Indian Coffee Workers’ Co-Op. Society Ltd. Vs. CCE & ST, Allahabad held that catering services provided at a place other than the caterer's own premises qualify as "outdoor catering."
- Conclusion:
- Up to 25.07.2018, the services provided by the applicant were classified under "Outdoor Catering Services" and covered under Sr. No. 7(v) of Notification No. 11/2017-Central Tax (Rate), attracting an 18% GST rate (CGST: 9% + SGST: 9%).

3. Taxability w.e.f. 26.07.2018:
- Amendments and Clarifications:
- Notification No. 13/2018-Central Tax (Rate) dated 26.07.2018 amended Notification No. 11/2017-Central Tax (Rate) to include an explanation clarifying that supply at a canteen, mess, cafeteria, or dining space of an institution (such as a school, college, hospital, industrial unit, office) based on a contractual arrangement is taxable at 5%, provided it is not event-based or occasional.
- This amendment rationalized the GST rate for such supplies to 5%, distinguishing it from event-based outdoor catering.
- Conclusion:
- W.e.f. 26.07.2018, the services provided by the applicant were classified under "Accommodation, food, and beverages services" and covered under Sr. No. 7(i) of Notification No. 11/2017-Central Tax (Rate), attracting a 5% GST rate (CGST: 2.5% + SGST: 2.5%).

Ruling:
- Up to 25.07.2018: The services provided by the applicant were classified under Sr. No. 7(v) of Notification No. 11/2017-Central Tax (Rate), attracting an 18% GST rate.
- W.e.f. 26.07.2018: The services provided by the applicant were classified under Sr. No. 7(i) of Notification No. 11/2017-Central Tax (Rate), attracting a 5% GST rate.