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TMI Blog2018 (7) TMI 1492X X X X Extracts X X X X X X X X Extracts X X X X ..... eakfast, lunch, evening tea and dinner to the employees of various companies. The food is prepared at our own kitchen and it is distributed to various companies at different locations. There are 4 different situations mentioned below on the basis of which the company is carrying on the abovementioned business. These situations are based on the terms of contract entered by Merit Hospitality with various corporate clients. Case l) The company (Merit Hospitality) has entered into a contract for supply of food to the employees of the company say 'A' Ltd. The contract is signed between Merit Hospitality and 'A' Ltd for supply of food. As per the terms of contract Merit Hospitality has to supply the food at 'A' Ltd.'s premises. The distribution of the food is directly done by the staff of 'A' Ltd. The menu and the material specifications are mentioned in the contract and also the rate for various items are pre-determined between Merit Hospitality and the company. The billing is done by Merit Hospitality directly to the company on monthly basis and payment is received from the company to Merit Hospitality directly as per the terms of payment mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ND CONTENTION - AS PER THE APPLICANT The submission, as reproduced verbatim, could be seen thus - "Provisions of law, applicants view point & submissions on issues on which advance ruling is sought. The services under discussion fall under SAC classification No 996333 Where under notification no [Serial No. 7(i) of notification No. 11/2017-CT (Rate) as amended vide notification No. 46/2017-CT (Rate) dated 14.11.2017 the rate of GST is stated at 2.5% as applicable to supply of food and beverages by a canteen' . The rates applicable in case of 'outdoor caterer' are defined separately at 9% under (v) in column of serial no 7in same notification no 46 under 7(v). A latest GST circular no.08/01/2018 in the matter of supply of food by hostel mess in colleges has clarified that 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. 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication dt. 28.06.2017 in Clause V. Hence, the activity of the dealer cannot be called as canteen activity and liable to pay tax @ 9% as outdoor caterer. 2. Case 2) Question : Can both the activities put together i.e. supply and distribution of food to the employees of 'A' Ltd. be called as canteen services and applicable rate of 5% be charged on our bills ? Reply: No Comment: As above 3. Case 3) Question : Can such circumstances can it still be claimed that Merit Hospitality is running a canteen and the applicable rate of 5% be charged on our bills ? Reply: No Comment: As above 4. Case 4) Question: (a) Can Merit Hospitality claim that since the food is supplied directly to SEZ area hence no GST is applicable ? or (b) Can Merit Hospitality claim that it is running a canteen in SEZ area hence no GST is applicable? or (C) Can Merit Hospitality claim that it is running a restaurant in SEZ area and hence applicable GST rate is 5% only? Reply: No Comment: As above Additional submissions Sr. No. Merit Hospitality Case No. Agreement submitted by the dealers Remark 1 Case 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e applicable rate of 5% be charged on our bills? M/s larsen & Toubro Grahak Sahakari Saunstha Maryadit. In this arrangement, though the agreement is made with M/s Larsen & Toubro Grahak Sahakari Saunstha Maryadit., the benefit of the circular No. 28/02/2018 - GST can not be given as same is available if the catering service is provided to the educational institution which runs canteen or mess for its students, faculty and staff. Hence applicable rate will be 9% each under CGST & SGST. 4 4. Case 4) Question : (a) Can Merit Hospitality claim that since the food is supplied directly to SEZ area hence no GST is applicable? or (b) Can Merit Hospitality claim that it is running a canteen in SEZ area hence no GST is applicable? or (C) Can Merit Hospitality claim that it is running a restaurant in SEZ area and hence applicable GST rate is 5% only? M/s.UBS Business Solutions (India) Pvt. Ltd. As per the terms and condition of the agreement, the supplier has to provide catering service and staff cafeteria in the office premises of UBS Though the supply is made to the SEZ area, same is not relevant with the purpose of the SEZ. Further it can not be treated as restaurant in SEZ area. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e I above would fall under canteen services and taxable @ 5%. We find that under Notification No. 11/2017-Central Tax (Rate) dated 28th June, 2017, under Serial No. 7 Heading 9963(i) covers accommodation, food and beverages services. The nature of services and the applicable tax rate on the same is as under:- 7 Heading 9963 (Accommodation, food and beverage services) (i) Supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or drink, where such supply or service is for cash, deferred payment or other valuable consideration, provided by a restaurant, eating joint including mess, canteen, neither having the facility of air-conditioning or central air-heating in any part of the establishment, at any time during the year nor having licence or permit or by whatever name called to serve alcoholic liquor for human consumption. 6 - (ii) Accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes having declared tariff of a unit of accommodation of one thousand rupees and above but less than two thousand five hundred rupees pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... human consumption), where such supply or service is for cash, deferred payment or other valuable consideration, in a premises (including hotel, convention center, club, pandal, shamiana or any other place, specially arranged for organising a function) together with renting of such premises. 9 - (viii) Accommodation in hotels including five star hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes having declared tariff of a unit of accommodation of seven thousand and five hundred rupees and above per unit per day or equivalent. Explanation.-"declared tariff " includes charges for all amenities provided in the unit of accommodation (given on rent for stay) like furniture, air conditioner, refrigerators or any other amenities, but without excluding any discount offered on the published charges for such unit. 14 - (ix) Accommodation, food and beverage services other than (i), (ii), (iii), (iv), (v), (vi), (vii) and (viii) above. 9 - We find that under this Notification after amendments uptill now GST @ 5% is chargeable in case of services by a restaurant, eating joint including mess and canteen as per relevant entry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey are not providing services to any college, university, military, police or government but to only business organizations or companies or their employees as per different situations mentioned by the applicant in his application. Thus in view of their question in regard to Case-I, we are required to check if their services as per Case-I can fall under providing of canteen services in a company or industrial establishment. We find that every industrial establishment aims to gain maximum profit at minimum costs through a loyal and cooperative workforce and for this it tries to provide a comfortable, convenient and pleasant environment to its employees. For this the employer under "Staff Welfare" provides various benefits and facilities to the employees. One of such facilities provided is "canteen facilities", which is also a statutory requirement as per Factories Act, if the total number of employees is more than as given under statutory rules and provisions. We find that as per general understanding, the core activity in an industrial canteen is cooking of items of food in kitchen and serving them fresh and hot to the consumers in the dining hall or its service area. The main fe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er organized force persons eat their food. On going through the situation as per submissions made by the applicant as per Case-I and corresponding details in respect of this situation claimed to be represented and submitted by the applicant as per copy of submitted agreement between Colgate Global Business P. Ltd. and Merit Hospitality Services P Ltd dated 01.12.2017, we find that the details as per Case-I submitted by the applicant in his Advance Ruling application are not in complete congruence with the details as visible in the agreement referred above and in view of this we will take up the issue for decision taking into consideration the facts and details as submitted by the applicant as per Case-I in the application and not as per claimed representative contract as submitted. We find that in Case-I, the applicant has given the case details as under:- "The company is registered as "Outdoor Caterers" under the GST Act. It was also registered in the same category under service tax regime The company is engaged in the business of supply, by way of and as a part of and in any other manner whatsoever of goods, being food and any other article for human consumption or drink. In n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and a company 'A Ltd'. It is not for running a canteen. (ii) Food is to be supplied at 'A Ltd.'s premises. (iii) The distribution of food is done by the staff of 'A Ltd'. Applicant is only supplying food. (iv) The menu, specifications and rate are as per contract of supply of food entered into between the applicant and M/s A Ltd. (v) The billing is done by the applicant directly to M/s A Ltd. on monthly basis and the payment is received from M/s A Ltd. as per contract. Thus as per the above details and discussions it is clearly visible that the service being provided by the applicant would not be covered under Serial No. 7 Heading 9963 (i) of Notification No. 11/2017 as amended. Now as we find that the services of the applicant are not covered under the above entry of Notification No. 11/2017 where the applicable rate of tax is 5%, therefore we are required to ascertain as to where the service being provided by the applicant would fall and what would be the tax rate applicable to them. In view of this now we examine the definition of "caterer" and "outdoor caterer" and see if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details the service being provided by the company would clearly fall under Group 99633 - Food, edible preparations, alcoholic and non-alcoholic beverages serving services and further under service code 996337 - Other Contract Food Services which are in the nature of outdoor caterer services [food preparation and/or supply services based on contractual arrangements with the customer, at institutional, governmental, commercial or industrial location/s specified by the customer other than for transportation companies, on an ongoing basis; food service concession services, i.e. the provision of operating services by operators of eating facilities such as canteens and cafeterias]. In view of the above classification of the services being provided by the applicant as per Case-I details would be taxable under Serial No. 7 Heading 9963 (v) @ 18% under GST as applicable. Case II) The facts mentioned in Case I remains the same except that in addition to supply of food on the request of the client Merit Hospitality Services Pvt. Ltd. also undertake the services of distribution of food for which Merit Hospitality raises separate bill charging 18% GST/ SGST Question: Can both the activiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th to a Special Economic Zone developer or a Special Economic Zone unit. We find that the benefit of zero rated supply as per Section 16(1)(b) would be allowed only when supply is to SEZ developer or a SEZ unit. We find that the definition of SEZ developer and SEZ unit as given in the SEZ Act, 2005 is as under:- SEZ DEVELOPER:- "Developer" means a person who, or a State Government which, has been granted by the Central Government a letter of approval under sub-section (10) of section 3 and includes an Authority and a Co-Developer. A "Co-Developer" means a person who, or a State Government which, has been granted by the Central Government a letter of approval under sub-section (12) of section 3. SEZ UNIT :- "Unit" means a Unit set up by an entrepreneur in a Special Economic Zone and includes an existing Unit, an Offshore Banking Unit and a Unit in an International Financial Services Centre, whether established before or established after commencement of this Act. Further we find that apart from an existing unit, a unit established in compliance of procedure prescribed in Section 15 of the SEZ Act, 2015 can be called a SEZ unit. Section 15 of the SEZ Act, 2005 is reproduced as u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evelopment Commissioner may, after approval of the proposal referred to in sub-section (3), grant a letter of approval to the person concerned to set up a Unit and undertake such operations which the Development Commissioner may authorise and every such operation so authorised shall be mentioned in the letter of approval. From the detailed provisions of Section 16 of the IGST Act and Section 15(1) to 15(9) of the SEZ Act, we find that the benefit of zero rated supply to domestic unit will be allowable only if the supply of goods or services are to a SEZ unit and the SEZ unit is granted a Letter of Approval by the Development Commissioner and the unit is undertaking only such operations which the Development Commissioner has authorized and every such authorized operations are to be mentioned in the letter of approval of the Development Commissioner as per the provisions of Section 15 (9) of the SEZ Act. Thus it is clear that the benefit of zero rated supply would be allowed to a domestic unit only if supply of goods or services to a SEZ unit or developer is only in respect of authorized operations as mentioned in the Letter of Approval of the Development Commissioner as per Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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