AAR-Gujarat, M/s. Gurukrupa Hospitality Services, ruling no: GUJ/GAAR/R/18/2019, Dated 28 August 2019
· Facts of the case:
M/s. Gurukrupa Hospitality Services (‘taxpayer’) has entered into an agreement with one of their clients for running of the canteen and its total affairs including supply of snacks, tea, lunch and dinner to its employee and workers at their canteen per the conditions in the agreement. They will be provided with some of the equipment by their client for carrying such activity.
· Question raised before AAR
What will be the classification of service and what is the rate of tax to be charged to the client?
The taxpayer submitted that the supply of food at client premises shall fall under the entry no: 6 of the schedule II -“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 any drink (...), where such supply or service is for cash, deferred payment or other valuable consideration, and it shall be deemed to be a supply of services;
Further, in ascertaining the rate of tax, the taxpayer classified the above supply under entry no: 7 (i) of the notification no: 11/2017–CT(R) dated 28 June 2017, attracting GST at the rate of 5%.
· Observations and ruling by the AAR
Upto25 July 2018, referring to the agreement, it was observed that the service recipient engaged the taxpayer for running of the canteen for their workers/employees, where the rates for the meal, snacks, tea and menu is fixed and payable by the recipient and service are provided from other than his own premises to the recipient. Accordingly, the said supply of services of the taxpayer is taxable under ‘accommodation, food and beverages services’ as a part of ‘outdoor catering services’ which is covered under entry no:7(v) of the table to the notification no:11/2017-CT(R) attracting GST at 18%;
W.e.f. 26 July 2018, vide notification no:13/2018-CT(R), notification no:11/2017-CT(R) 28 June 2017 was amended to insert explanation 1 at column 3 at entry no:7(i), which reads as under: “This item includes such supply at a canteen, mess, cafeteria or dining space of an institution such as a school, college, hospital, industrial unit, office, by such institution or by any other person based on a contractual arrangement with such institution for such supply, provided that such supply is not event based or occasional.”
Due to the insertion of the explanation, the supply of services by the taxpayer would fall under entry 7(i) i.e., 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;
The explanation also affords clarity on the scope of outdoor catering i.e., is restricted to supplies in case of outdoor/indoor functions which are event based and occasional in nature;
The AAR held that upto25 July 2018, the said supply of services by the taxpayer is taxable at 18% and thereafter at 5%.
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