2018 (12) TMI 1088 - AAR - GST

Levy of GST - Canteen services - services of serving food - input tax credit - N/N. 13/2018-Central Tax(Rate) dt.26.7.18 - principle supply - rate of GST - composite supply with transport service Held that - The activity of supply of food in canteens of office factory hospital college industrial unit etc. on contractual basis excepting that supply is not event based or on specific occasions constitute supply of service in terms of amended Notification No.13/2018-Central Tax(Rate) dt.26.7.18 and is taxable at rate of 2.5% CGST 2.5% SGST and the supplier is not eligible for the input tax credit as per the condition stipulated therein. Earlier CBEC has clarified the queries seeking clarification regarding the taxability and rate of GST on services by a college hostel mess. As per the Circular No. 28/02/2018-GST dated 08-01-2018 issued in this regard normally the educational institutions have mess facility for providing food to their students and staff. Such facility is either run by the institution/ students themselves or is outsourced to a third person. Further it has been clarified that the supply of food or drink provided by a mess or canteen is taxable at 5% without Input Tax Credit Serial No. 7(i) of notification No. 11/2017-CT (Rate) as amended vide notification No. 46/2017-CT (Rate) dated 14.11.2017 refers . Levy of GST - Transport services to a training institute for carting food from one building to another for service/sale - Held that - The applicant in addition to the supply of food is also undertaking transportation of food from the place of preparation of food to the premises where it is served. Here the applicant is undertaking two supplies one is supply of food and another is transportation service. Two supplies are involved and it is a composite supply where the supply of food is a Principal Supply and providing transportation is ancillary supply. In the instant case principal supply being supply of food i.e. outdoor catering service and transportation is ancillary the whole transaction attracts 18% GST being highest rate of tax compared to tax on transportation service. Therefore the applicant needs to discharge GST on the gross amount (cost of Food cost of Transportation ) at the rate of 18% i.e. GST rate of outdoor catering service. Ruling - The activity of supply of food in canteens of office factory hospital college industrial unit etc. on contractual basis excepting that supply is not event based or on specific occasions constitute supply of service in terms of amended Notification No.13/2018-Central Tax(Rate) dt.26.7.18 and is taxable at the rate of 2.5% CGST 2.5% SGST and the supplier is not eligible for the input tax credit as per the condition stipulated therein. Where the applicant provides transport services to a training institute for carting food from one building to another for service/sale and the applicant charges a separate transport charges the applicant needs to discharge GST on the gross amount (cost of Food cost of Transportation) at the rate of 18% GST.

Summary

Issues Involved:
1. Advance Ruling sought on the rate of GST to be levied on various activities related to supply of food and transportation services.

Analysis:

1. Background and Application: M/s. Prism Hospitality Services filed an application seeking Advance Ruling on the GST rate for their services. They are engaged in providing cleaning services, maintaining canteens, and supplying food to various organizations since 2005. The application covered activities like canteen services, food supply to training institutions, student mess operations, and transportation services.

2. Classification of Services: The applicant's services were categorized under the Notification No.13/2018-Central Tax(Rate) dated 26.7.18. This notification specified the rate of GST for the supply of food in canteens of offices, factories, hospitals, colleges, etc., on a contractual basis. The applicable rate was determined to be 2.5% CGST + 2.5% SGST without eligibility for input tax credit.

3. Educational Institutions' Mess Facility: A clarification by CBEC highlighted that the supply of food or drink by a mess or canteen in educational institutions is taxable at 5% without Input Tax Credit. This rate applied whether the service was provided by the institution itself or outsourced to a third party.

4. Composite Supply: Regarding the transportation of food along with the supply of food, it was deemed a composite supply with two components - supply of food and transportation service. As per Section 8 of the CGST Act, the tax liability for a composite supply is determined based on the principal supply. In this case, the principal supply being outdoor catering service, the entire transaction attracted 18% GST, the highest applicable rate.

5. Ruling and Conclusion: The Authority for Advance Rulings concluded that the supply of food in canteens and the transportation services provided by the applicant fell under different GST rates. While the former was taxable at 2.5% CGST + 2.5% SGST, the latter was subject to 18% GST. The ruling clarified the tax implications for the applicant's diverse range of services based on the specific nature of each activity.

This detailed analysis of the judgment provides a comprehensive understanding of the issues addressed by the Authority for Advance Rulings in determining the GST rates applicable to the services provided by M/s. Prism Hospitality Services.