GST Rates for Outdoor Catering Services with Input Tax Credit

In re Smt. Natrajan Jothilakshmi (Jothi Catering Services) (GST AAR Tamilnadu)

The case of In re Smt. Natrajan Jothilakshmi (Jothi Catering Services) (GST AAR Tamilnadu) involves a request for an advance ruling on the GST rate and HSN code for outdoor catering services provided by Jothi Catering Services. The applicant sought clarification on whether their service of supplying food and beverages to industrial workers under a contractual arrangement would be classified under ‘Outdoor Catering’ and the applicable GST rate and HSN code for the same.

Applicant’s Claim: JCS requested clarification on the following:

• Rate of Tax: They were unsure if their service attracts 5% GST (without Input Tax Credit – ITC) or 18% GST (with ITC).
• HSN Code: They wanted to know the relevant HSN code for their activity.

The Authority for Advance Ruling (AAR) in Tamil Nadu concluded that the applicant’s service does not fall under ‘Outdoor Catering’ as defined by the GST law, which is typically for event-based and occasional nature services like those provided at exhibition halls, events, conferences, marriage halls, and similar functions. Instead, the AAR classified the applicant’s service under ‘Other Contract Food Services’ with the Service Accounting Code (SAC) 996337. This classification is meant for services based on contractual arrangements with the customer at specified locations other than for transportation companies, on an ongoing basis.

The ruling further determined that since the service provided by Jothi Catering Services does not fall into the specific categories of ‘restaurant service’, ‘outdoor catering’, or ‘hotel accommodation’, it would be categorized under a residual entry which attracts a GST rate of 9% CGST and 9% SGST, totaling an 18% GST rate.

The AAR’s decision is based on the understanding that the applicant’s service of supplying prepared food and beverages does not involve distribution at the client’s premises and is thus considered a supply of service. The service is deemed to fall under the ‘Other Contract Food Services’ category, which is distinct from ‘Outdoor Catering’ as it involves a contractual arrangement for providing food services to industrial or commercial locations on a regular basis, not linked to specific events or occasions.

Authority’s Response:

The AAR provided the following interpretations:

• Outdoor Catering vs Contract Catering: JCS’s services don’t fall under the definition of “outdoor catering” as per the relevant notification (Notification No. 20/2019-CT(Rate) dated 30.09.2019). Outdoor catering is defined as event-based and occasional services, such as those provided at exhibitions, conferences, or marriage halls.
• HSN Code: The AAR confirmed the HSN code for JCS’s activity as 996337 – “Other contract food services.”
• GST Rate: Since JCS’s services are not considered “outdoor catering” and don’t fall under any other specific categories mentioned in the notification, they fall under the residual entry (entry No. 7(vi) of the notification). This entry attracts a higher GST rate of 18% (9% CGST + 9% SGST) with the ability to claim ITC.

In summary, the AAR ruled that Jothi Catering Services’ activity of supplying food under a contract to industries falls under the category of ‘Other Contract Food Services’ (SAC 996337), subject to an 18% GST rate as per the Notification No.11/2017-CT(Rate) dated 28.06.2017, as amended by Notification No.20/2019-CT(Rate) dated 30.09.2019.

FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, TAMILNADU

M/s Jothi Catering Services, 127-1, Thottasalai Veethi, Valayapalayam Pirivu, Kaduvettipalayam Post, Via Karumathampatti, Coimbatore 641659 (hereinafter called as ‘the Applicant’) are registered under the GST Acts with GSTIN: 33BCLP,18525M1Z6.

2.1 The Applicant submitted a copy of challan evidencing payment of application fees of Rs.5,000/- each under sub-rule (1) of Rule 104 of CGST Rules 2017 and SGST Rules 2017.

2.2 In their application for Advance Ruling, the Applicant has stated, inter-alia, that they arc undertaking outdoor catering services. The service receiving companies are not accepting to the notification or any details regarding the rate of tax and HSN code given by the Applicant but insisting upon them, the latest notification for the rate of tax and HSN code for the said services. Therefore the Applicant has filed an application before the Authority for Advance Ruling, Tamil Nadu, with the said questions.

3.1 The State jurisdiction Officer viz. the Assistant Commissioner(ST), Karumathampatti Circle, has stated that supply of outdoor catering is taxable at 5% without ITC and with ITC the GST rate is 18% and the HSN code for outdoor catering is 996334. The jurisdictional Officer also remarked that no proceeding on the issue related to the question raised by the applicant is pending in her jurisdiction.

3.2 The Joint Commissioner (ST), Erode Intelligence Division has also remarked that no proceeding relating to the question raised by the applicant is pending in her jurisdiction.

3.3 The Centre Authority vide letter dated 22.09.2023, has submitted that Outdoor catering services will attract 5% GST provided that credit of input tax charged on goods or services used in supplying the services has not been taken(Reference: Explanation No.(iv)) vide Notification No.20/2019-CT(Rate) dated 30.09.2019, w.e.f. 01.10.20199 amending the principal Notification No.11/2017-CT(Rate) dated 28.06.2017. He stated that the HSN code for the same is 996334 and the latest Notification in this regard is Notification No.20/2019-CT(Rate) dated 30.09.2019. Further, it was also stated that no proceeding on the issue related to the question raised by the Applicant is pending.

4. The Applicant, after consent, was given an opportunity to be heard in person on 10.10.2023. Shri C.Krishnakumar, GST Practitioner, who is the Authorized Representative of the Applicant appeared for the hearing and he reiterated the submissions made in their application. The Members directed the AR to submit sample copy of agreement executed by them with their clients and also a copy of the invoice, if any, issued by them. They stated vide their email dated 14.11.2023 that they intend to supply food to the workers of large industries and vide their email dated 15.11.2023 a copy of template of agreement to be executed with their future clients.

DISCUSSION AND FINDINGS:

5.1. We have carefully considered the submissions made by the Applicant in their application, submissions made during the personal hearing and the comments furnished by the Centre and State Tax jurisdictional officers.

5.2 In terms of Section 97(2) of the CGST/TNGST Act, questions on which advance ruling is sought under the Act, falls within the scope of Section 97(2)(a), (b) & (c) of the CGST/TNGST Act, 2017, and therefore the application is admissible.

5.3. The Applicant furnished copy of template of agreement to be executed by them with their future clients and also stated that they arc proposing to supply prepared food and beverages to the workers of large industries. On perusal of the template agreement submitted by the Applicant, it is inferred that they plan to supply prepared food and beverages to their clients, deliver the same to the client’s premises but not involved in the distribution of food in the client’s premises. Thus the Applicant would be doing a catering service on a contract. The Applicant would charge their clients according to the quantity of food supplied. The Applicant has requested for the appropriate Tariff heading for their activity, Rate of Tax and relevant notification.

5.3 The first and foremost point to be decided is whether the said activity of the Applicant is a supply of service. Schedule II given under Section 7 of the CGST Act, 2017 lists the activities to be treated as supply of goods or supply of services. The portion relevant to the subject issue is reproduced below:

6. Composite supply: The following composite supplies shall be treated as a supply of services, namely:—

(a) ….

(b) …. 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 (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration.

From the above, we find it is evident that the activity to be undertaken by the Applicant viz. supply of food and beverages for a consideration is ‘supply of service’.

5.4 To decide the Tariff/Service code, we find that the Annexure to the Notification No.11/2017-CT(Rate) dated 28.06.2017 lists the classification of services and the relevant chapter, Section Heading or Group, the relevant portion of which is reproduced under:

Annexure: Scheme of Classification of Services

The explanation given in the explanatory notes to the services in respect of the heading 996337 states as follows:

“9963370ther contract food services

This service code includes 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.”

From the above explanation, we find that the service rendered by the Applicant falls under the Tariff/Service code 996337.

5.5 The said service will not fall under ‘Outdoor Catering Service’ as stated by the jurisdictional Officers in their remarks, as the definition/explanation to the said term is given by Notification No.20/2019-CT(Rate) dated 30.09.2019, which amended the Notification No.11/2017-CT(Rate) dated 28.06.2017 and the same is given as under:

“(xxxiii) ‘Outdoor Catering’ means 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.”

From the above, we find that the activity undertaken by the Applicant will not fit into the explanation given for ‘Outdoor catering’.

5.6 The rate of tax to be adopted for the activity of the Applicant is as per Notification No.11/2017-CT(Rate) dated 28.06.2017, which notifies the Central Tax applicable on various services, which is amended by Notification No.20/2019-CT(Rate) dated 30.09.2019, which is reproduced below:

The explanation given in the said Notification for various terms are as follows: –

“(xxxii) ‘Restaurant service’ means supply by way of or as part of any service, of goods, being food or any other article for human consumption or any drink, provided by a restaurant, eating joint including mess, canteen, whether for consumption on or away from the premises where such food or any other article for human consumption or drink is supplied.

(xxxiii) ‘Outdoor Catering’ means 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.

(xxxiv) ‘Hotel accommodation’ means supply by way of accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes including supply of time share usage rights by way of accommodation.

(xxxvi) ‘Specified premises’ means premises, providing ‘hotel accommodation’ services having declared tariff of any unit of accommodation above seven thousand five hundred rupees per unit per day or equivalent.”

From the above definitions, it can be seen that the restaurant service covers only services provided by restaurant, mess or canteen, thereby, the activity to be undertaken by the Applicant, that providing catering service under a contract to Industries would not be covered under ‘restaurant service’. The said activity of the Applicant would not be covered under ‘outdoor catering service’ as it is not an event based or an occasional service. It will not be covered under ‘hotel accommodation’ and also not a ‘specified premises’. Thus the service to be undertaken by the Applicant does not fall under 7(i) to 7(v) of the description given in the said Notification. Therefore, we find that the catering services of the Applicant under a contract would be falling under entry No. 7(vi), being the residual entry and thereby attract 9% CGST and 9% SGST as per Notification No.11/2017-CT(Rate) dated 28.06.2017.

Based on the above discussions, we rule as under:

RULING

The proposed activity of supply of food by the Applicant falls under ‘other contract food service’ under SAC 996337 attracting 18% of GST, as per Notification No.11/2017-CT(Rate) dated 28.06.2017 amended by Notification No.20/2019-CT(Rate) dated 30.09.2019.