Fact: – Ismail Ahamad Soofi (“the Applicant”) is in the business of providing catering/ canteen services to the industries and corporates. The applicant enters into contract with companies for providing catering services to its employees either B2C Model or B2B Model.
Under B2C Model, the Applicant enters into contract with the companies to provide catering services to the employees of the companies, where the consideration is paid directly by the employees to the Applicant on monthly basis. Under B2B Model, the Applicant enters into contract with the companies to serve food and beverages to the employees of the companies in the Cafeteria designated within the companies’ premises, and the amount of consideration is paid directly by the companies as per agreed schedule.
Further, It is important to note that as per Section 46 of the Factories Act, 1948, the certain companies/institutions are under statutory obligation to provide canteen services to its employees. Under such circumstances, the companies/institutions outsource the activity of running the canteen to the third-party service providers, like the Applicant. Presently, the Applicant treats the catering services provided by it under B2C Model as canteen/restaurant services under Entry. No. 7 (i) of Notification No. 11/2017 dated 28th June 2017 as amended by the Notification No. 46/2017- Central Tax (Rate) dated 14th November 2017 and discharges GST at 5%cumulatively (CGST & SGST). For the catering services provided by it under B2B Model, the Applicant treats it as outdoor catering services under Entry 7 (v) of the abovementioned Notification and discharges GST at 18% cumulatively (CGST & SGST). However, given the absence of clarity in the area of catering services, the Applicant would like to seek an advance ruling whether the catering services provided by it.
Issue Involved: – Whether the catering services provided by the Applicant under B2B and B2C Model are classified as Canteen Services under the Entry No. 7(i) of the Notification No. 11/2017 dated 28th June 2017 as amended by the Notification No. 46/2017-Central Tax(Rate) dated 14th November 2017 or as outdoor catering services under Entry No. 7(v) of the said Notification?
Applicant Contention of Law: – Relevant legal provisions on canteen services under the current GST Regime. The terms ‘canteen/’ ‘restaurant’ are not defined anywhere in the GST Act or under the erstwhile Service Tax Regime. Hence, reliance is placed on the dictionary meaning of the word ‘restaurant’. The meaning of the term ‘Restaurant is given in the Concise Oxford English Dictionary as a place where people pay to sit and eat meals that are cooked and served on the premises.’ The meaning of the term ‘Canteen’ is given in the above referred Dictionary as a restaurant in a workplace or educational establishment. Therefore, the canteen is understood to be a place, generally in an organization or institute such as factory, school, etc. where meals are provided. Therefore, to constitute a canteen it is important that Such place must be in organization, institutes such as factory, school, etc and Meals must be provided at such place.
Further, the Applicant would like to bring to your attention the Circular No. 28/02/2018-GST dated January 08, 2018. The Circular provides that the supply of food or drink provided by a mess or canteen to the students and staffs are to be classified under 5% category of catering services irrespective of such services being provided by the educational institution itself or is outsourced to an outside contractor. Therefore, it is amply clear that the catering services provided by anyone other than the educational institutions (i.e. an outdoor caterer) to the students, staff, etc. of the education institution, is to be treated as canteen’ services as covered under Entry No. 7(i) of Notification No.11/2017 – CT (Rate) and would attract 5% GST cumulatively (CGST & SGST).
Held:-The Hon’ble AAR of Maharashtra vide Advance Ruling No. GST/-ARA-05/2018-19/B- 61 dated September 9, 2018 stated that the services supplied by the applicant in normal course does not appear to be covered under clause (v) of the N. No: 13/2018-CT(R). From a reading of clause (v) before and after the amendment it is seen that the word ‘outdoor catering’ does not find a mention post the amendment. Hence it can be inferred that the said clause post the amendment made considers outdoor catering as a Supply, by way of or as part of any service, of goods, being food or any other article for human consumption or any drink, at Exhibition Halls, Events, Conferences, Marriage Halls and other outdoor or indoor functions that are event based and occasional in nature. Therefore, the supply of catering services provided by the applicant cannot be considered to be in the nature of “outdoor catering”.
Further, the activity undertaken by the applicant in the subject case would be classified as canteen services under Entry. No 7(i) or (iv) of Notification No. 11/2017 dated 28th June 2017 depending on whether their canteen has the facility of air air-conditioning or central air-heating in any part of the establishment, at any time during the year. However as per amended Notification No. 46/2017- Central Tax (Rate) dated November 14, 2017, their service would fall under Sr. No. 7(i) of this amended Notification. Therefore, Catering/Canteen services to Industry/Corporates, taxable @5% under both B2B & B2C Models as per amended Notification No. 11/2017.
Citation: [TS-677-AAR-2018-NT]