2020 (5) TMI 602 - AAR - GST

Applicability of TDS under GST - catering services to educational institutions sponsored by State/ Central / Union territory - Sl. No. 66 of the Notification No.12/ 2017-Central Tax (Rate) dated 28.06.2017 - Circular 65/ 39/ 2018 - HELD THAT - The agreements for the supply of services are entered between the Heads of the Residential Schools and the applicant and the recipient of service is hence, the Residential Schools. The nature of the contract is verified and found that the successful bidders have to prepare the food in the respective schools only and there is no provision of providing food cooked outside the premises or from one school to another. Hence the applicant has to prepare the food in the school premises and supply it to the students of the school for a monthly consideration. Further, it is seen that the students to whom the service is provided are from the Primary School category. Hence the service is a catering service provided to an educational institution which is a primary school and hence is covered under the Entry No.66 of Notification No.12/2017- Central Tax (Rate) dated 28.06.2017 as amended from time to time and is exempted from the payment of GST. The provision of tax deduction at source is applicable on the payment made to a supplier of taxable services and since the applicant is supplying exempt services, the said provisions are not applicable to the payments made to him by the educational institutions.

Summary

Issues:
1. Whether catering services provided to educational institutions fall under exempted services and are not liable for tax deduction at source under GST.

Analysis:

Issue 1: Exempted Services and Tax Deduction at Source (TDS)

The applicant, an association providing catering services to educational institutions, sought an advance ruling on whether their services, falling under HSN Code 9992, are exempt from TDS under GST. The applicant argued that as per Circular 65/39/2018, TDS is applicable only for taxable supply contracts, and since they provide exempted services to educational institutions sponsored by the government, TDS should not be applicable to them.

Upon review, the Authority examined the relevant provisions of the CGST Act and the KGST Act, noting that the applicant's services were covered under entry no. 66 of Notification No. 12/2017-Central Tax (Rate), which exempts catering services to educational institutions. The Authority verified the contracts between the applicant and the recipient of services, confirming that the agreements were with the Heads of the Residential Schools, making the schools the recipients of the services.

Further analysis revealed that the nature of the contract required the applicant to prepare food on the school premises for the students, indicating a catering service provided directly to primary school students. As per Section 51(1) of the CGST Act, TDS is applicable only to taxable services, and since the applicant's services were exempt, TDS provisions did not apply to payments made by educational institutions to the applicant.

Conclusion:

The Authority ruled that the catering services provided by the applicant to educational institutions fell under the exempted category as per the relevant notifications. Therefore, the services were exempt from CGST and SGST. Additionally, the amount received for such exempted services was deemed not liable for tax deduction at source under Section 51 of the CGST Act and the KGST Act.

This comprehensive analysis of the judgment delves into the intricacies of the issues raised by the applicant and the Authority's findings, providing a detailed understanding of the legal implications and conclusions drawn in the case.